TAXATION
This query is : Resolved
17 June 2009
WHAT IS THE MEANING OF FINANCIAL LEASE AND OPERATING LEASE
17 June 2009
Operating Lease
An operating lease is particularly attractive to companies that continually update or replace equipment and want to use equipment without ownership, but also want to return equipment at lease-end and avoid technological obsolescence. An operating lease usually results in the lowest payment of any financing alternative and is an excellent strategy for bypassing capital budgeting restraints. It typically qualifies for off-balance sheet treatment and can result in improved Return On Asset (ROA) due to a lower asset base. It can also result in higher reported earnings in the early years of the lease.
Finance Lease
A finance lease is a full-payout, noncancellable agreement, in which the lessee is responsible for maintenance, taxes and insurance.
Finance leases are most attractive in cases where the lessee wants the tax benefits of ownership or expects the equipment's residual value to be high. These leases are structured as equipment financing agreements with residuals up to 10 percent. The lessee purchases the equipment upon lease termination at a pre-agreed amount. The term of a finance lease tends to be longer, nearly covering the useful life of the equipment.
An operating lease is particularly attractive to companies that continually update or replace equipment and want to use equipment without ownership, but also want to return equipment at lease-end and avoid technological obsolescence. An operating lease usually results in the lowest payment of any financing alternative and is an excellent strategy for bypassing capital budgeting restraints. It typically qualifies for off-balance sheet treatment and can result in improved Return On Asset (ROA) due to a lower asset base. It can also result in higher reported earnings in the early years of the lease.
Finance Lease
A finance lease is a full-payout, noncancellable agreement, in which the lessee is responsible for maintenance, taxes and insurance.
Finance leases are most attractive in cases where the lessee wants the tax benefits of ownership or expects the equipment's residual value to be high. These leases are structured as equipment financing agreements with residuals up to 10 percent. The lessee purchases the equipment upon lease termination at a pre-agreed amount. The term of a finance lease tends to be longer, nearly covering the useful life of the equipment.
Message likes :
1 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Is this income indian or foreign income?
- ITC temporary reversal and reclaim
- Inventory of finished goods
- Applicable TDS rate for sale of property in Nov 2024
- REGARDING 25 AS DATE OF PAYMENT AND DATE OF BOOKING
- RCM INVOICING FROM NOV-2024
- GST Regis.
- Confusion around Form 26QB fields
- Tds on building rent monthly
- Clarification on Documentation of Paid-Up Capital Contribution by Directors
- As per schedule III of balance sheet how to pass journal entry
- Is correct way to find out capital of individual on 31st March
- Individual capital equal to which assets of balance sheet
- LAST YEAR 2022-23 ITC IN NEXT YEAR 2023-24 REPORITNG IN GSTR-9
- MIS MATCH OF INVOICE NUMBER
- IGST Credit-Show cause notice issued-confusion
- Issue of gst e invoice
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
Trending Online Classes
CAclubindia
