Filter by Categories
Accounting
Banking

Accounting




Financing Lease


A type of lease in which a financier (a finance company, a bank) is and remains the legal owner of the leased asset during the entire period of lease, while the lessee has operating control over that asset and enjoys the economic benefits/ risks incidental to the ownership of the asset. This lease is based on providing finance by acquiring an asset for, and placing it at the disposal of, a lessee, for most of the useful life of that asset. There are a set of criteria that must be met in order to classify the lease a financing lease, including (1) coverage of a significant portion of the useful economic life of the asset by the lease term (generally, 75%), (2) existence of a bargain purchase option (whereby the lessee can purchase the asset at a price lower than its fair value at a future date, and (3) the net present value of minimum lease payments is 90% of the fair value of the leased asset, at least.

A financing lease is also called a capital lease or a sales lease.



ABC
Accounting is the language of business, everywhere, worldwide. It is the means by which virtually every business communicates information about its operations, irrespective of size, scale, objectives, ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*