One of the five criteria for a finance lease specifies that the present value of the lease payments be equal to or greater than: Multiple Choice the major part of the cost of the asset. substantially all of the fair value of the asset. substantially all of the cost of the asset.

Substantially all of the fair value of the asset

Explanation:

A lease is a contractual arrangement by which a lessor provides a lessee the right to use an asset for a specified period of time.

A financial leases is when a lessee has, in substance, purchased the lease asset, assumed when one of five classification is met. which are

1. The agreement specifies that ownership of the asset transfer to the lessee

2. The agreement contains a purchase option that the lessee is reasonably certain to exercise (bargain purchase option)

3. The lease term is for "major part" of the remaining economic life of the underlying asset.

4. the present value of the lease payments equals or exceeds "substantially all" of the fair value of underlying asset.

5. The underlying assets is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.