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In this video, we will discuss the five tests used to determine whether a lease should be classified as an operating lease or a finance lease. Under the new standard, leases longer than one year must be capitalized, with the lessee recognizing an asset and liability on their balance sheet. The key question is how to classify the lease, as it can impact the income statement. This distinction affects whether interest expense, amortization expense, or lease expense is recognized. Detailed accounting implications will be covered in a future video, but for now, focus on understanding how leases are classified.