Examples of lease in the following topics:
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- Capital leases and operating leases are two types of leases with different criteria.
- A capital lease (or finance lease) is a type of lease.
- Under US accounting standards, a finance (capital) lease is a lease which meets at least one of the following criteria:
- An operating lease is a lease whose term is short compared to the useful life of the asset or piece of equipment (an airliner, a ship, etc.) being leased.
- Unlike a Financial Lease or Finance lease, at the end of the operating lease the title to the asset does not pass to the lessee, but remains with the lessor.
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- Sometimes a customer will purchase a leased product at the end of the lease term and never return it to the manufacturer.
- Similarly, after a transfer of ownership, the customer may sell the leased product on the second-hand market.
- Both of these practices can break the closed-loop cycle needed for leasing to provide its benefits.
- In this regard, products may need months or perhaps years of redesigning or rethinking before leasing can become profitable.
- (Fishbein, Bett, McGary, Lorraine, and Dillon, Patricia, ‘Leasing: A Step toward Producer Responsibility', Inform Inc.)
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- The main advantage of leasing lies in a business' ability to attain assets without outlaying essential cash.
- For businesses, leasing property may have significant financial benefits, which are outlined below:
- Leasing is less capital-intensive than purchasing, so if a business has constraints on its capital, it can grow more rapidly by leasing property than by purchasing property.
- Leasing shifts risks to the lessor, but if the property market has shown steady growth over time, a business that depends on leased property is sacrificing capital gains.
- Leasing may provide more flexibility to a business which expects to grow or move in the relatively short term, because a lessee is not usually obliged to renew a lease at the end of its term.
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- There are two types of leases: capital leases and operating leases and each has a different accounting methodology.
- There are two types of leases capital leases and operating leases.
- A capital lease is a form of debt-equity financing in which the lease acts like loan.
- Under an operating lease, the lessee records rent expense (debit) over the lease term, and a credit to either cash or rent payable.
- Lease Bonus: Prepayment for future expenses.
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- For example, customers often lease software products.
- Additional advantages of B2B leasing agreements include flexible lease-to-own programs.
- A lease can be structured to allow the purchase of equipment at the end of the lease for fair market value of the hardware.
- However, some leases will allow product upgrades before the end of the lease.
- Leasing terms sometimes include hidden fees and penalties at the conclusion of the lease, all of which can cost the organization extra money.
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- In accounting, leases can be considered either operating leases or capital leases (also called financial leases).
- The present value of the minimum lease payments (MLP) is equal to or greater than 90% of the fair market value of leased property
- If any one of these criteria are accurate in a given leasing contract, the lease is considered a capital lease and thus will impact the assets and liabilities of the balance sheet.
- The lessee records rent expense (debit) over the lease term, and a credit to either cash or rent payable when on an operating lease.
- With a capital lease, the lessee does not record rent as an expense.
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- Leasing is a long-term profi t strategy that demands long-term thinking.
- Customer needs and desires must be ascertained, insurance and liability issues must be addressed, employee training must be ongoing, and an incentive must be provided for customers to return leased products to the lessor after use.
- With careful forethought and planning, however, under the right circumstances, leasing has proven to be a good way for companies to move closer to sustainability while lowering production costs, increasing revenues and decreasing waste.
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- Electronic equipment, paint, cars, wood pallets, reusable totes, furniture, rags and linens, parts washers, almost anything – including temperature – can be leased.
- The Carrier air-conditioning company in the USA, for example, leases cooling services to its clients rather than air conditioners.
- (Hawken, Paul, Lovins, Amory, and Lovins, Hunter, Natural Capitalism) As with any leasing arrangement, ownership of Carrier's air-conditioning equipment is maintained by the company, which means that Carrier is highly motivated to keep its products in optimum condition.
- In a similar fashion, the Bank of Japan collaborated with Japanese power companies to facilitate the leasing of energy-efficient automobiles, home appliances and water heaters to everyday consumers.
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- From 1941-1945, the U.S. provided weapons and war materials to Allied forces under the Lend-Lease Act.
- In exchange, Britain granted the U.S. various land in British possession for the establishment of naval or air bases on ninety-nine-year rent-free leases.
- Lend-Lease was a critical factor in the eventual success of U.S.
- From 1943–1944, roughly a quarter of all British munitions came through Lend-Lease.
- FDR signs the Lend-Lease Act in 1941, marking greater U.S. involvement in WWII
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- If it depreciates, lease it. ' John Paul Getty, Billionaire
- Today, many researchers credit the Xerox corporation with pioneering cradle-to-cradle practices in the 1980s by leasing photocopiers instead of selling them.
- To achieve this goal, Interface developed what it calls an ‘Ever-Green Lease' in which the company focuses on leasing what a carpet is supposed to deliver rather than selling the carpet itself.
- This is good news for customers because it means that when a leased carpet begins to show wear, Interface will come in, pull up the worn areas, and immediately replace them (a service that is part of the lease arrangement).
- Not to be outdone, DuPont has developed a similar carpet-leasing program to enhance its carpet manufacturing subsidiary.