BU397 Chapter Notes - Chapter 20: Leaseback, Amortization Schedule, Book Value
Document Summary
A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment or a series of payments, the right to use an asset for an agreed period of time. A finance lease is a lease that transfers substantially all the risk and rewards incidental to ownership of an asset: title may not eventually be transferred. Operating leases are any leases other than finance leases. Perceived ads to leasing: for 100 percent financing at a fixed rate. Rate charged is fixed for the term of the lease: protection form obsolescence. Lease may be structured to meet different needs: less costly financing for the lessee. Tax incentives for the lessor: off-balance sheet financing. Some leases do not add debt on the balance sheet or affect financial ratios. 1: do not capitalize any leased assets- executory contract approach: since the lessee doesn"t own the property capitalization is considered inappropriate, since executor contracts aren"t capitalized, leases shouldn"t be either.
