Lease Term includes which of the following renewal periods?

• A. The fixed, non-cancelable term only.
• B. The fixed term plus renewal periods at the option of the lessor.
• C. The fixed term plus ordinary renewal periods.
• D. The fixed term plus renewal periods that precede a bargain purchase option.

Answer: (C)

The lease term is not just the fixed noncancelable period; it also includes renewal periods that the lessee is reasonably certain to exercise. Those are the ordinary renewal periods, and they extend the term because the lessee expects to use them. Renewal options at the lessor’s option aren’t included, since the lessee can’t be sure those will occur. A bargain purchase option affects term only to the extent the lessee is reasonably certain to exercise it, but the defining rule is the lessee’s reasonably certain renewal periods. So the best answer is the fixed term plus ordinary renewal periods.