In accounting, generally any lease term which is less than an year is considered as operating lease and lease term longer than an year is financial lease. However, you can choose to overrule these criteria for other accounting standards, but in GASB this is followed strictly. In GASB, short-term leases are always operating leases.

To determine whether a lease is 'operating' or 'finance' you have first calculate the lease period, for which both Renewal options and Termination options are taken in to account. Based on these rules, the lease period is calculated and the type of lease, 'operating' or 'finance', is ascertained.