=+extend beyond the date a bargain purchase option becomes exercisable. A lease which is cancellable (i) only upon the occurrence of some remote contingency, (ii) only with the permission of the lessor, (iii) only if the les-

see enters into a new lease with the same lessor, or (iv) only upon pay-

ment by the lessee of a penalty in an amount such that continuation of the lease appears, at inception, reasonably assured shall be considered

"noncancellable" for purposes of this definition.

Required:

How can this test be circumvented through either the structuring of the lease contract or interpretation of the test? What are other ways in which lease capitalization could be avoided through the structuring of lease terms or interpretation of the tests? What problem does this exer-

cise illustrate?