Chapter 8 Leasing
Chapter 8 Chapter 8 Leasing Leasing
Leasing Long-term lease over a term of more than five years is a method of financing property,plant and equipment. Lessee:the user of the equipment Lessor:the owner of the equipment. Lessor is either the assets'manufacturer or an independent leasing company slide 1
slide 1 Leasing Leasing Long-term lease over a term of more than five years is a method of financing property, plant and equipment. Lessee: the user of the equipment. Lessor: the owner of the equipment. Lessor is either the assets’ manufacturer or an independent leasing company
Buying versus Leasing Manufacturer Manufacturer Of Asset Of Asset Firm U Lessor Lessee 1. Uses asset . Owns asset ·Uses asset 2.Owns asset not use asset ·not own asset Equity Creditors Equity Creditors Shareholders Shareholders slide 2
slide 2 Buying versus Leasing Buying versus Leasing Manufacturer Of Asset Firm U 1. Uses asset 2. Owns asset Equity Shareholders Creditors Manufacturer Of Asset Lessor • Owns asset • not use asset Lessee • Uses asset • not own asset Equity Shareholders Creditors
Operating Lease Not fully amortized -To require the lessor to maintain and insure the leased asset -The cancellation option slide 3
slide 3 Operating Lease Operating Lease Not fully amortized To require the lessor to maintain and insure the leased asset The cancellation option
Financial Lease Not provide for maintenance or service by the lessor ■Fully amortized -The lessee usually has a right to renew the lease on expiration Can't be cancelled slide 4
slide 4 Financial Lease Financial Lease Not provide for maintenance or service by the lessor Fully amortized The lessee usually has a right to renew the lease on expiration Can’t be cancelled