Final answer:
A lease is classified as a capital lease if its term is at least 75% of the equipment's estimated economic life, treating it like an asset purchase for accounting purposes.
Step-by-step explanation:
To be classified as a capital lease by the lessee, the lease term needs to be at least 75% of the estimated economic life of the equipment. This is one of the criteria set out by the Financial Accounting Standards Board (FASB) for a lease to be considered a capital lease, which implies that the lease, for accounting purposes, is treated like an asset purchase. If the lease meets this criterion, the lessee has to record the leased asset as if it were bought, including both the asset and the liability on their balance sheet.