Lessees may try to avoid having a lease be classified as a capital lease.Explain why a lessee might want to avoid a capital lease and how the FASB rules may be overcome to allow classification as an operating lease.

Capital Lease

A lease agreement where the lessee essentially becomes the owner of the asset for accounting purposes, often including an option to purchase at the lease's end.

Operating Lease

An operating lease is a lease agreement for the use of an asset where the lessee obtains rights to use the asset for a fraction of the asset's useful life without ownership transfer.

FASB

The Financial Accounting Standards Board is responsible for establishing accounting and financial reporting standards for companies and nonprofit organizations following Generally Accepted Accounting Principles (GAAP) in the United States.