Question: Which of the following is not a criterion for a lease to be recorded as a finance lease?

1. There is transfer of ownership.
2. The lease is cancelable.
3. The lease term is for the major part of the economic life of the asset.
4. There is a bargain-purchase option.

A lease is a contract in which the owner of the property grants the user of the property the right to use the property for a set length of time. The owner of the property is referred to as the 'lessor,' while the user to whom the rights are transferred is referred to as the 'lessee.'

A finance lease is a non-cancellable lease since neither the lessee nor the lessor can cancel it before the lease's planned termination date as long as both parties fully comply with the lease's contractual terms and conditions.

Option 2) is clearly the correct answer, as evidenced by the accompanying explanation.

Option 1) In a financial lease, the transfer of ownership is possible and it is transferred to the lessee.

Option 3) The lessor transfers the asset to the lessee for a long period of time under a finance lease. In most cases, this time encompasses a significant portion of the asset's economic life.

Option 4) A bargain purchase occurs when a firm buys another company for less than the fair market value of its assets. So, in finance lease bargain purchase is possible.