Advantages And Disadvantages Of Lease

Therefore in this agreement the equipment is going to be partially financed by the lessor (Northwest) through a third-party financial institution (Lender) and act as a leveraged lease, wherein the lending company holds the title to the leased asset, while the lessor creates the agreement with the lessee (BNRR) and collects the payment for the use of the equipment. Therefore the lease in this case will be regarded as a financial decision for BNRR

The Leasing is convey out four reasoning’s which are: To be able to obtain better maintain services, to refrain to the administrative delays of the capital budget petition, to acknowledge for availability, to refrain technological extinction. A financial other than traditional debt financing of capital investments. Leasing offers the use that is usually the option to obtain capital benefit. For other cooperatives, certain changes in the economy might give strength to

• Lessor may require the lessee to perform general repairs and maintenance on the leased premises.

Case 11-6 deals with Lessee Ltd., a company that operates in Britain and uses IFRS. The question in this case is how to classify a lease that Lessee, Ltd. acquired from Lessor Inc. The accounting standard that deals with leases under IFRS is IAS 17. IAS 17 was originally issued in September 1982 and was reissued in December 2003. It classifies leases as either finance leases or operating leases. Finance leases make it so that the lessee recognizes an asset and a liability and the lessor recognizes a receivable, basically transferring all the risks and benefits of ownership. Under operating leases, the lessor still recognizes the asset and the lessee recognizes an expense.

Research has been performed for your client to give informative information about leases and lease structures. Through this research there are three sub-types of leases from the standpoint of the lessor, which are direct financing leases, sales-type leases, and operating leases. The information found on the Financial Accounting Standards Board website pertaining to each type of lease will guide your client to making an appropriate decision regarding which type of lease will be beneficial to their company.

Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title.

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether the arrangement

the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;

A direct financing lease is defined in ASC 840-10-25-43(b). Again, a direct financing lease must meet the conditions to be classified as a capital lease along with not giving a profit or loss to the lessor and does not meet the criteria for being a leveraged capital lease presented in ASC 840-10-25-1. Direct financing leases recognize a net investment in the lease and selling loss from lease, if applicable. (ASC-840-10-25-7). It would also recognize interest revenue when payments are received.

Lease agreements are usually part of the negotiations; sellers may sublease or prefer a new lease to be removed from liability.

In today’s world, customers often face a dilemma about whether to buy or lease. Lease is an agreement in which one party gains a long term rental agreement, and the other party receives a form of secured long term debt. On the other hand, buying involves transfer of ownership from seller to buyer. Buying or leasing decision depends mostly on customer’s preference. There are many factors to consider before taking a buying or leasing decision.

~ Wet leases are leases in which the lessor provides almost, if not, everything to the lessee. This will usually include the aforementioned flightcrew, insurance, ground crew, etc. Wet leases are generally utilized as short-term solutions for major and minor airlines looking to meet high demands or flyer volumes.

Leasehold covenants are contractual obligations contained in leases, between the landlord and the tenant. There are generally 3 types:

Leasing refers to a vehicle procured for a fixed length of time. The operator never owns the vehicle outright, but has full use of the vehicle, as if he was the owner. The vehicle is purchase by a finance house to the requirement of the operator. They may have no involvement in the transport industry, so don’t need to have an ‘O’ licenses to operate the vehicles that are purchased. A mutually agreed contract is written up with the terms and conditions of the leasing.

leased asset have been transferred from the lessor to the lessee. Under EAS, the leased asset is recognized in the lessor