Finance leases are long-term or noncancelable leases in which the lessor transfers substantially all the risks and rewards of ownership to the lessee.

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Finance leases are designed to transfer the risks and rewards of ownership to the lessee, which means that they are typically long-term and noncancelable agreements. Under these types of leases, the lessee assumes most of the expenses and responsibilities associated with owning the asset, while the lessor retains legal ownership. This is in contrast to operating leases, where the lessor retains more control and responsibility for the asset.

Finance Leases Are Long-Term or Noncancelable Leases in Which the Lessor