The accounting manual of the Holdenor group, a lessor of industrial equipment, states: finance lease if the term reaches 75% of the economic life or if the present value of payments reaches 90% of fair value; otherwise operating lease. A new lease has a term equal to 70% of the economic life and a present value equal to 88% of fair value. The lessee bears the lessor's losses if it cancels, and it can extend the lease for 3 years at a rent substantially lower than market. The controller concludes on an operating lease by applying the manual. Write a critical memo on this policy and on the conclusion reached.