BLM20255 | Defining long funding leases: the three tests: the useful economic life test: CAA01/S70P

The useful economic life test is the second of the two main tests that may result inoperating leases being classified as long funding leases.

The useful economic life test is met if the term of the lease (see BLM25100)is more than 65 per cent of the remaining useful economic life of the asset.

The remaining useful economic life is defined in CA01/S70YI as the period

• beginning with the commencement of the term of the lease (BLM25005), and

• ending when the asset is no longer used, and no longer likely to be used, by any person for any purpose as a fixed asset of a business.

In considering the useful economic life of an asset follow the principles set out in CA23720 (long life assets).