If the present value of the lease payments is at least 90% of the fair market value at the start of the lease, this would cause a lease to be declared a capital lease for accounting purposes.

Present Value

The present value of a future amount of money or series of cash inflows, discounted by a particular return rate.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting the value agreed upon by a willing buyer and seller.

Capital Lease

A lease classified as a purchase by the lessee for accounting purposes, as it involves the transfer of ownership rights of the asset to the lessee.