FIN 401 Lecture Notes - Lecture 3: Canada Revenue Agency, Finance Lease, Operating Lease
6 Feb 2017
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Lecture #3: leases and lease types, accounting and leasing, taxes, canada revenue agency (cra), and leases, the cash flows from leasing, lease or buy, a leasing paradox, reasons for leasing. Lease contractual agreement for use of an asset in return for a series of payments. Lessee user of an asset; makes payments. Lessor owner of the asset; receives payments. Direct lease lessor is the manufacturer. Captive finance company subsidiaries that lease products for the manufacturer. Operating leases are still off- balance- sheet and do not have any impact on the statement of financial position itself. After- tax lease payments (outflow: lease payment * (1 t) Lost depreciation tax shield (outflow: depreciation * tax rate for each year. Lecture #3: inflow because we save the cost of purchasing the asset now. May have incremental maintenance, taxes or insurance depending on the type of lease and whether the leased asset is replacing one currently owned.
