Bargain purchase option - How To Discuss

Bargain purchase option,

Definition of Bargain purchase option:

1. A bargain purchase option is a clause in a lease agreement that allows the lessee to purchase the leased asset at the end of the lease period at a price substantially below its fair market value.

2. The Financial Accounting Standards Board (FASB) defines a bargain purchase option as a provision that allows a lessee to purchase the leased property "for a price which is sufficiently lower" than the expected fair value at the date that the option can be exercised.

3. Stipulation in a lease agreement that gives a lessee the right to purchase the leased asset at the end of the lease term, at a cost substantially lower than its estimated fair market value at that time. According to the Financial Accounting Standards Board, if a non-cancelable lease has a bargain-purchase option, it must be classified as a capital lease.

How to use Bargain purchase option in a sentence?

1. The capital lease is recorded in an amount equal to the present value of all the minimum lease payments over the term of the lease.
2. Under the Financial Account Standard Board's rules, a bargain purchase option would require the lessee to treat the lease as a capital lease as opposed to an operating lease.
3. A bargain purchase option in a lease allows the lessee to purchase the leased asset when the lease period is over at a price below the fair market value.