CERTYNEX IFRS ACADEMY

The lessor Montrel leases for 4 years a flight simulator whose economic life is estimated at 15 years. At the end of the lease, ownership of the simulator transfers to the lessee for a variable payment equal to the simulator's fair value at that date. The payments over the term cover a small part of the initial fair value, and no other clause transfers any risk or reward to the lessee. Which classification is appropriate?

Finance lease, because any transfer of ownership at the end of the lease requires that classification.

Operating lease, because the other features clearly show that the risks and rewards essentially remain with the lessor.

Finance lease on a provisional basis, with a new classification when ownership actually transfers.

No classification until the lessee has decided to pay the fair value.