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1009.1: Accounting for Leases

Subject Area: Accounting
Responsible Office: Financial Services
Sponsor: Associate Vice President for Finance
Originally Issued: October 1992
Revised: January 2010
Refer Questions To: James Ribikawskis, 773-702-3690


Purpose: The University may lease plant or equipment as required by normal operations.

Policy

1. Financial Services is responsible for classifying leases in the year of their origination as either operating or capital leases in accordance with the applicable financial accounting guidance.

2. Financial Services is responsible for accounting for all leases during the life of the lease in accordance with the applicable financial accounting guidance. Generally, those standards provide that:

1. Lease payments for leases classified as operating leases shall be recorded as an expenditure paid over the life of the lease.
2. Leases classified as capital leases shall be recorded as an asset and a liability equal to the lesser of either the fair market value of the asset at the inception of the lease or the present value of the lease payments during the life of the lease.