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A variety of operational, financial, and tax incentives often make leasing an attractive alternative to purchasing. A lessee should classify a lease transaction as a finance lease if one or more of five classification criteria is met, and a lessor should record the lease as a sales-type lease. If none of the five criteria is met, both the lessee and the lessor classify the lease as an operating lease. The criteria are used to identify situations when the lease is economically similar to the purchase of an asset because the lessee obtains control of the underlying asset, meaning the ability to direct the use of the asset and obtain substantially all of its remaining benefits, in contrast to merely obtaining control over the use of the asset for a period of time. Knowledge Check 01 Which of the following statements about why companies frequently choose to lease assets are true? Note: Select all that apply. revision: 10_31_2025_QC_HETS-10261