Why Leasing Becomes More and More Preferable for a Company in Indonesia?

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

ASC 410-20-15-3(e) also states that the lessee’s obligation to perform a retirement activity shall be recorded as ARO unless the payment meets the definition of minimum lease payments or contingent rentals under the lease accounting literature (ASC 840, Leases). Per ASC 840-10-25-5, the minimum leases payment is any costs obligated to make in connection with the leased property. However, the lessee’s obligation to restore the leased asset to the original condition is related to the leasehold improvement, not directly related to the leased asset. Accordingly, the cost of removing the leasehold improvements is not part of the minimum lease payment. In addition, due to the ‘no renewal option’ and ‘no ability to negotiate for the renewal’ under the lease agreement, it is certain that NeedsLease will incur costs to restore the leased property to its original condition in 10 years, which excludes the ‘contingency’. Therefore, the cost of reinstating to the property’s original condition should be accounted as ARO in accordance with ASC 410-20. Per ASC 410-20-25-4, ARO should be recognized at its fair value of reasonably estimated future cash flows and to offset the liability, the lessee capitalize the

The first sub-type lease from the standpoint of the lessor is a direct financing lease. To be classified as a

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;

upfront payment to lease the parcel of land for the expected 20-year life of the project.

Exchange leasers: They are occupied with the liquidity of the firm, which will help the association to pay for the products and enterprises

Conversely, insufficient capacity or inefficient computing resources can stunt growth. The company that waits until it can afford to purchase the right hardware and software may find itself unable to remain competitive. Moreover, although businesses would rather keep their credit lines open for unforeseen events, they must sometimes act quickly to adopt economically attractive new technology. Before we examine the attributes which make leasing attractive to so many companies we need to review two most common types of leasing arrangements.

b. Any guarantee by the lessee (including by a third party related to the lessee) of the residual value at the expiration of the lease term, whether or not payment of the guarantee constitutes a purchase of the leased property. If the lessor has the right to require the lessee to purchase the property at termination of the lease for a certain or determinable amount, that amount shall be considered a lessee guarantee of the residual value. If the lessee agrees to make up any deficiency below a stated amount in the lessor 's realization of the residual value, the residual value guarantee to be included in the minimum lease payments shall be the stated amount, rather than an estimate of the deficiency to be made up.

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 financing is a contractual relationship formed between a lessor, lessee and a supplier. The lessor buys goods from the supplier and rents the goods to a lessee who is given the right to possession of the good for a specified amount of time. This turns into a financing situation, since the lessee owes a debt to the lessor for purchasing the goods on behalf of the lessee . The lessor will usually benefit from an interest rate percentage that is collected from the lessee in exchange for financing the goods. Article 2A of the U.C.C is dedicated completely towards the true leasing of goods (Clarkson, 2015, p.383). Although the rules governing the leasing of goods is similar to the sale of goods covered in Article 2, Article 2A specific contract rules pertaining to leasing relationships. Under Aricle 2A-407, the lessee’s obligations to the finance contract are irrevocable and separate from the obligations of the financer. The lessee is obligated to make payments regardless if the equipment’s ends up defective and must refer to the supplier for relief of the defective product(Clarkson, 2015, p.). For example, a Bank purchases equipment and leases it to ABC Corp. The equipment later turns out to be defective and ABC Corp. stops making lease payments. The bank will be able to sue ABC Corp. because under Article 2A, payments are due regardless of the equipment condition.

In order to gain a full perspective on this issue, it is important to first define the concept of a lease. A lease is an agreement conveying the right to use property, plant, and equipment (PP&E) usually for a stated period of time (Diffen, 2015). The two parties involved are the lessee (party paying for use of the asset) and the lessor (party that owns the asset but is leasing to another). Leasing has become incredibly popular, especially for organizations that may be just starting and are attempting to avoid long term investments of

* A broader capital base gives the company more access to credit which gives the company an option to venture into new business opportunities

This occurs when the contract cannot be fulfilled due to unexpected events or possibilities that radically change the nature of the contract (Pentony, Graw, Lennard & Parker, 1999). This occurred in Taylor v Caldwell , where Taylor contracted to hire a building for a concert. Shortly before the concert, a fire destroyed the building. The building was essential to the performance of the contract, and this contract was terminated by frustration due to there being no building as a result of the fire.

The market value of a leased vehicle is normally lower than the residual value. The residual value of a leased vehicle is adjusted downward towards carrying the value during the lease end that approximates the estimated end of term market value. During the quarterly periods, TMCC reviews the estimated end of term market values of a leased vehicle to assess the aptness of carrying the values. Thus, the factors affecting the estimated end of term market value is somewhat similar to the evaluation considered for the residual value.

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