Many government lease agreements contain a fiscal funding clause that permits cancellation of the agreement if the legislature or other funding authority does not appropriate the needed funds. FAS 13 includes in the consideration of whether a lease is capital a determination of whether the lease is cancelable. However, a lease “that is cancelable (1) only upon the occurrence of some remote contingency… shall be considered ‘noncancelable’ for purposes of ” determining the lease term.
If a fiscal funding clause exists, you should determine whether the likelihood of its exercise is remote. If so (the normal situation), it should be ignored for purposes of entering the lease data into EZLease.
If a fiscal funding clause is actually exercised, the lease should be early terminated in EZLease.