5.3 Purchase Options
ASC 842-10
30-3 At the commencement date, an entity shall assess an option to purchase the underlying asset on the
same basis as an option to extend or not to terminate a lease, as described in paragraph 842-10-30-2.
When evaluating the lease term, an entity would consider a purchase option in
the same manner as it would an option to extend or not terminate a lease. If it is
reasonably certain that a lessee will exercise the option to purchase the underlying
asset at the end of the lease term, the lessee will (1) classify the lease as a
finance lease (see Section
8.3.3.4) and (2) amortize the ROU asset over the underlying asset’s
remaining useful life and not over the lease term (see Section 8.4.3.1). Similarly, a lessor that
concludes that the lessee is reasonably certain to exercise the purchase option will
(1) classify the lease as a sales-type lease and (2) include the option purchase
price as a lease payment that is used in the measurement of the net investment in
the lease (see Section 9.2.1.2). Section 6.4 discusses the
effect on lease payments of determining that the exercise of a purchase option is
reasonably certain.