International Financial Reporting Standards

In the over 100 countries that govern accounting using International Financial Reporting Standards, the controlling standard is IAS 17, "Leases". While similar in many respects to FAS 13, IAS 17 avoids the "bright line" tests (specifying an exact percentage as a limit) on the lease term and present value of the rents. Instead, IAS 17 has the following five tests. If any of these tests are met, the lease is considered a finance lease:

• ownership of the asset is transferred to the lessee at the end of the lease term;
• the lease contains a bargain purchase option to buy the equipment at less than fair market value;
• the lease term is for the major part of the economic life of the asset even if title is not transferred;
• at the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset.
• the leased assets are of a specialised nature such that only the lessee can use them without major modifications being made.