> ## Documentation Index
> Fetch the complete documentation index at: https://docs.tangoanalytics.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Run the lease classification test

> Determine whether a lease should be classified as an operating or finance lease.

The lease classification test determines which accounting treatment (operating or finance lease) applies to a lease under FASB 840 or FASB 842. This tab is optional and is not required to use the accounting schedule functionality.

<Steps>
  <Step title="Navigate to the Classification Test">
    From the lease home, select the lease and click **Lease Financials**, then click the **Lease Classification Test** tab.
  </Step>

  <Step title="Select the accounting standard">
    Use the radio option to select **FASB 840** or **FASB 842**. The form fields change based on your selection. FASB 842 includes a fifth test question not present in FASB 840.
  </Step>

  <Step title="Set the payment types and dates">
    Select the payment types to include in the test (populated from the Recurring Costs tab) and enter the **Effective From** and **To** dates.
  </Step>

  <Step title="Answer the test questions">
    Work through each test criterion:

    * **Ownership transfer** — does the lease transfer ownership?
    * **Purchase option** — is there a purchase option the lessee is reasonably certain to exercise?
    * **Economic life** — does the lease term represent a major part of the asset's remaining economic life?
    * **Fair value** — does the present value of payments represent substantially all of the fair value?
    * **Specialized asset** (FASB 842 only) — is the asset specialized with no alternative use?

    <Info>Input fields appear in blue; system-calculated values appear greyed out and populate after saving.</Info>
  </Step>

  <Step title="Calculate and save">
    Click **Calculate and Save**. The test result appears at the top of the page in red font as the **Current Lease Classification**.
  </Step>

  <Step title="Sync the classification (if needed)">
    If the test result differs from the classification on the Basic Info tab, the system prompts you to sync the two values. Click **OK** to update.
  </Step>
</Steps>

<Note>You can re-run the classification test at any time. The current classification shown in red always reflects the most recently saved test result.</Note>