FNBU 3441 Chapter Notes - Chapter 27: Finance Lease, Operating Lease, Leaseback

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27. 1 leases and lease types: lease contractual agreement for use of an asset in return for a series of payments, lessee user; makes payments, lessor owner; receives payments. Leasing vs. buying: direct leases leasing company purchases assets from manufacturer, captive finance companies subsidiaries that lease products for the manufacturer. Financial leases (capital leases: long-term, usually sufficient to fully recover asset"s (cid:272)ost + roi, fully amortized / full-payout lease, ca(cid:374)"t (cid:271)e (cid:272)a(cid:374)(cid:272)eled (cid:449)ithout a sig(cid:374)ifi(cid:272)a(cid:374)t pe(cid:374)alt(cid:455, similar to debt financing, types, tax-oriented leases. Lessor is the asset"s o(cid:449)(cid:374)er for ta(cid:454) purposes. Conditional sales agree(cid:373)e(cid:374)t lease is(cid:374)"t a true lease the(cid:455)"re just se(cid:272)ured loa(cid:374)s. Tax-orie(cid:374)ted lease i(cid:374) (cid:449)hi(cid:272)h the lessor (cid:271)orro(cid:449)s a su(cid:271)sta(cid:374)tial portio(cid:374) of the leased asset"s (cid:272)ost on a non recourse basis. If the lessee defaults, the lessor does"t ha(cid:448)e to keep (cid:373)aki(cid:374)g the loa(cid:374) pa(cid:455)(cid:373)e(cid:374)ts. Instead, lender must proceed against the lessee to recover investment.

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