...1. What is leasing? Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments. According to legal and economic viewpoints, leasing is the "transferral of capital goods for use for a defined time against payment". Due to reporting possibilities in the balance sheet, leasing is an alternative from a tax point of view to financing. In order to take a leasing you should sign a contract, that is called “lease contract”. Leases are the contracts that lay out the details of rental agreements in the real estate market. For example, if you want to rent an apartment, the lease will describe : -how much the monthly rent is -when it is due -what will happen if you don't pay -how much of a security deposit is required -the duration of the lease -whether you are allowed to have pets -how many occupants may live in the unit and any other essential information. The parts that are participating at this contract are : a.the lesee- the receiver of the services or the assets/ the renter ; the person renting property under a written lease from the owner b.the lessor- the owner of real property who rents it to a lessee pursuant to a written lease 2. Types of leasing There are three main types of lease: Finance Leasing and Operating Leasing and Contract Hire. Finance Leasing * Under a finance lease, the finance company owns the asset throughout and the agreement covers...
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...Operating lease 15.5.3 Sale and lease back 15.5.4 Leveraged leasing 15.5.5 Direct leasing 15.6 Advantages of leasing 15.7 Leasing in India 15.8 Concept & Meaning of Hire purchase 15.9 Difference between Lease Financing and Hire Purchase 15.10 NSIC & Hire Purchase 15.11 Factoring 15.11.1 Factoring procedure 15.11.2 Merits 15.12 Summary 15.13 Glossary 15.14 Self Assessment Questions 15.15 Further Readings 15.0 INTRODUCTION In order to start and sustain a business one needs finance. In the unit one on feasibility study, you have already seen the process of estimating financial requirements. The process involved (a) making a list of all the assets (b) identifying the sources of supply (c) estimating the cost of acquisition when the assets are to be acquired on outright basis. Then investment requirements as well as entrepreneur’s fear will increase. To scare away the entrepreneur’s fear, the emphasis should be given to resources and not to the ownership. In this unit we intend to familiarize you with some important financial innovations i.e., leasing, hire purchase and factoring. 228 15.1 OBJECTIVES After going through this unit you should be able to • Describe the meaning of leasing • Explain the role and importance of lease financing in economic development of a country • Distinguish between the various types of leases • Describe the meaning of hire purchase • Distinguish between leasing and hire purchase • Describe the meaning of factoring 15.2...
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...Fargo Leasing Limited (FLL) provides lease financing to companies and individuals for equipment other than automobiles. Leases on commercial signs make up 50% of total leases, computer and telecommunications equipment make up 30% of total leases and restaurant equipment makes up the remainder. FLL’s customers arrange to buy new equipment from equipment dealers, then contact FLL to arrange lease financing. FLL was founded over thirty years ago by Laura and Al Smith. It is now run by Mr. and Mrs. Smith’s daughter, Betsy, who is the President of FLL. FLL owns a small building downtown, where the offices of the business are located. Unused office space is rented out to other commercial tenants. Betsy was a classmate of yours at University of British Columbia, and you have kept loosely in touch over the years. This year, she moved the audit to your firm (a local firm with five partners), deciding that the firm her parents had hired many years ago did not really understand her business’ needs. FLL has a small loan that is used to cover fluctuations in working capital. The company has two salespeople. Most loans are received from stores throughout the city, with who FLL has standing agreements. If customers require financing, they fill in an application at the store, which is faxed to FLL for approval- FLL with reply to the customer within two business days. The company has been profitable for many years. There are no extraordinary items in the current year’s...
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...PREFERRED STOCK, LEASING, CONVERTIBLES, WARRANTS, AND OPTIONS II IIJ Understand the basic rights of preferred stockholders, the features of preferred stock, special types of preferred stock and the advantages and d isadva ntages of preferred stock. Review the basic types of leases, leasing a rrangements, the lease contract, the lease-versus-pur chase decision, the effects of leasing on future financing , and the adva ntages and d isadvan tages of leasing. Describe the basic types of converti ble securities, their general fea tures-incl ud ing the conver sion ratio, conversion period, conversion (or stock) value, and effect on earnings-and financ ing with convertibles. • II Demonstrate the procedures for dete rmi ning the stra ig ht bond value, conversion (or stock) va lue, and market value of a convertible bond. Explain the basic characteristics of stock purchase wa rrants, the implied price of an attached warrant, and the va lues of warrants-theoretical, market, and warrant premium. Define options and discuss the basics of ca ll s a nd puts, options markets, options trading, the role of call and put options in fund raising, and using options to hedge foreign currency expo sures. the DISCIPLINES CHA PTER 14 I S I MPOR TA NT TO • u((ounting personnel who will provide important data a nd tax insights to the lease-versus-purchase decision process. • information systems analysts who will design systems that p'ro vide...
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...staff usage, reduced energy costs, and reduction of capital spending. The company can free up money overall and maintain better control of the IT budget by leasing. The cost of equipment is spread out over a 3-year period by leasing. There are no disposal fees because the leasing company will be responsible for the equipment leased. By replacing the current sever setup ( the company has over a dozen machines running 24 hours every day), with new leased IBM compact server, we will cut power costs by up to 50%. CONTENTS Summary 2 Introduction 4 Discussion 4 Requirements Scope and Background 4 requirements to be achieved: 4 several leasing and finance companies with the best solutions for the company 4 Salary Expense Before Leasing fig 1 5 Salary Expense After Leasing fig 2 5 Leasing and Financing Programs 7 Leasing and Financing fig3 7 benefits of hiring a leasing company: 8 Conclusion 9 Bibliography 10 Appendix A 11 INTRODUCTION This report explores the methods other companies use to conserve working capital. The recommendation is to lease to keep the company at the forefront of the technology curve, and keep working capital free. The company will also have the option to upgrade equipment when the next advancement occurs at a fraction of the purchase price of the same equipment. Leasing computer equipment and technology protects the company from equipment obsolescence. In the past, we have purchased all of our IT equipment. This strategy...
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...University of Kentucky UKnowledge Faculty Publications College of Law 1-1-1987 Strict Liability for Chattel Leasing Richard C. Ausness University of Kentucky College of Law, rausness@uky.edu Recommended Citation Richard C. Ausness, Strict Liability for Chattel Leasing, 48 U. Pitt. L. Rev. 273 (1987). This Article is brought to you for free and open access by the College of Law at UKnowledge. It has been accepted for inclusion in Faculty Publications by an authorized administrator of UKnowledge. For more information, please contact UKnowledge@lsv.uky.edu. ARTICLES S TRICT LIABILITY F OR C HATTEL L EASINGt R ichard C. Ausness* Leasing has become an increasingly popular substitute f or outright purchases as a means o f acquiring products f or use. Few courts a nd commentators, however, have addressed the question o f whether the principles o f strict products liability which apply to sellers also apply to lessors. I n this Article, Professor Ausness reviews the historical basisfor imposing strict liability in tort on sellers a nd applies these rationales to five basic kinds o f lease transactions. H e concludes that strict liability should not apply when a product defect arises after the leased product is placed in the hands o f the lessee (as contrasted with the more typical case o f " manufacturing defects" which arise when the product is manufactured), nor when the leased product is a fixture attached to real property. I n such cases, the lessor should be held to a negligence...
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...SCHOOL OF ACCOUNTANCY UNIVERSITI UTARA MALAYSIA BKAT 2013 – PRINCIPLES OF TAXATION TUTORIAL 3 – UNEARNED INCOME QUESTION 1 Under what circumstances income derived from rental of properties is taxable under Section 4(a) – Business Income instead of under Section 4 (d) – Investment income? QUESTION 2 (A) Mr. Rozmi has opted to retire from MR Resources Sdn Bhd in 2011. In 2012, he reported the following with regards to his income: Pension - optional retirement | 3,000 | Annuity paid by Bening Insurance Bhd, a Malaysian life insurer | 9,000 | Malaysian dividend, net | 14,400 | Royalties from musical composition | 23,000 | Interest on fixed deposits with Maybank for 15 months' tenure | 16,000 | Mr Rozmi owns a service apartment, which is let out for rent. The statement of income and expenditure for the year ended 31 December 2001 is as follows: Rent received | | | 26,300 | Less: Expenses | | | | Mortgage loan interest | 14,400 | | | Quit rent | 300 | | | Assessment and rates | 150 | | | Cost of tiling the cement floor of the balcony | 1,200 | | (16,050) | Net rental income | | | 10,250 | The accumulated rental loss brought forward from the previous year was RM2,800. REQUIRED: Computed the aggregate income for Mr Rozi for the year assessment 2012 (B) Mr Ramli and his wife jointly owned a condominium that had been let for rent since 2006. The statement of rental income and expenditure is as follows: Rent received: | |...
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...Good opinion piece. The way the medallions turned into a highly sought after legal tender needs scrutiny. When the owners started leasing cabs by the flat fee for a shift, then the medallions became bullet-proof money makers: No matter how slow the business was, the owners made out. When Boston Cab Company used a paid-mileage system, where the initial lease fee was less than $10/shift (about 45 cents /mile) and gas-ups on the garage dime, then the drivers were not ever placed in that serf-like scenario. I know this, because I drove under both scenarios in the very early 1980's....part of that time (2 years) as a "company" driver using their paid-mileage system, the other part as a driver of an "independent" cab that operated under the "association" (meaning painted like a Boston Cab..brown/white, with the same radio dispatch system). When I drove for the "company" (Then owned/operated by the Barenholtz brothers), I was never discriminated against, though I will say that the "window of shame" behavior was about 50 times worse than that depicted by the TV show "TAXI", with absolutely no humor involved. When I drove for an independent, then I had extreme mobility, but I had to pay a $40/shift fee and fill the cab with gas. It could be a tough nut to crack (about $50) on a daily basis at that time, but I preferred it. What seems to have happened now is that the leases are just too expensive for the drivers in relation to the fare structure and the cost-of-living. When I drove in the...
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...Introduction | | Throughout this course, as well as in FI515, we haveassumed that firms own fixed assets and report them on their balance sheets. However, since it is the productive use of assets that is important and not necessarily the form of ownership, we'll spend some time this week looking at leasing as an alternative to buying. This alternative way of obtaining the use of equipment and facilities is currently available for virtually any kind of fixed assets, with over 30% of all new capital equipment being currently financed through lease arrangements. Lease transactions involve two parties: the lessor, who owns the property, and the lessee, who gains the right to use of the property in exchange for one or more lease, or rental, payments. | | Types of Leases | | In chapter 19, you will find a description of the five most important types of leasing arrangements, which include 1. operating lease, 2. financial, or capital, lease, 3. sale-and-leaseback arrangement, 4. combination lease, and 5. synthetic lease. Please keep an eye on the so called "synthetic" leases, which are still subject to a great deal of controversy after their "creative" use by such corporate names as Tyco and Enron. | | Tax Effects | | The full amount of the lease payments is a tax-deductible expense for the lessee for as long as the IRS agrees that a particular contract is a genuine lease and not just a loan called a lease. This makes it important that...
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...DIRECTOR OF LEASING JOB DESCRIPTION The Director of Leasing, to the President. The Director of Leasing will be responsible for the leasing, marketing and overall relationships for all of our tenancy and oversee the management of all real estate holdings for our organization and related companies. While initially focusing on the three main areas of responsibility below, we look forward to developing this description with the successful candidate to better define the duties going forward. |LEASING: | |Responsible for leasing, renewing leases, lease interpretation and analysis and coordinating documentation flow for all leasing | |activities. | |Negotiate and draft leases; lease addendum and modifications; other documents as required for our portfolio of commercial properties. | |Keep ownership updated on current status of leases, including terms of leases and process of approving any new lease terms. | |Process and administer all lease contracts. | |TENANT RELATIONS: | |Provide...
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...purchase items or lease items, as an individual and in the business world. If you purchase an item at the wrong time, it could easily put a company as risk for financial hard times. The following will detail some important factors to review when purchasing or leasing is an option. The Differences between Leasing and Purchasing Both leasing and purchasing has its pros and it cons. The trick is to figure out which would be better for a company’s current financial status. Leasing allows a lessee to avoid large down payments, keep updated materials, lower lease payments due to shared tax advantages, and the property that is being leased does not show as an asset or liability. These are all positive factors if your company is a smaller company and does not have the cash to purchase the material or only needs the material for a limited time. Next are a few pros of purchasing through a capital lease. Leasing payments on an operational lease might be higher than those payments on a capital lease due to interest rates and since the company does not own the property, it must not be abused or used to harshly because it will be returned to the lessor. A capital lease gives you tax breaks such as deprecation, while operational leasing does not. As stated above, operational leases (rental agreements) and capital leases (purchasing leases) both have their pros and cons. Again, it is really the current financial status of the company that would determine which method would be best. Financial...
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...To: Audit Supervisor From: nigel Date: April 1, 2001 Subject: Accounting for Lease Agreement with HasSpace Inc. In response to your request for accounting guidance regarding the lease agreement with HasSpace Inc, we will address your main questions concerning how the to account for the following: (1) depreciation (if applicable) and expenditures of leasehold improvements, (2) possible general repair and maintenance costs , and (3) the possible re-instation to the property’s original condition. From the information you have provided, the lease agreement has a duration of 10 years and qualifies as an operating lease in accordance with ASC 840, because there is not an option to renew nor has the ability to negotiate for renewal provided in the lease agreement. Our company has placed into service various leasehold improvements (e.g., temporary walls, HVAC, carpeting) that have economic useful lives of 12 years. The lease agreement contains certain provisions that may require our company to perform general repairs and maintenance on the leased premises, and our company may be required to remove all leasehold improvements such that the premise is reinstated to original condition. Our company’s leasehold improvements will be capitalized and depreciated over their useful lives. The leasehold improvements have an economic life of 12 years, while the term of the operating lease is only 10 years. ASC 840-10-35-6 states that...
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...operating expense on financial statements, and they do not show up as capital of the company. This would be beneficial to them because they are unsure of the length that the current opportunity will last. The Regional Trucking Company fits into this structure of a lease very well. An operating lease is a good choice in this company’s situation. FASB Statement Number 13 states, “Normally, sales-type leases will arise when manufacturers or dealers use leasing as a means of marketing their products.” The Regional Trucking Company that we are consulting for needs an additional twenty trailers; they will not be leasing their own equipment. Hence, a sales-type lease would not be the type of lease they should go with. It would not make any sense because they are not trying to compete in their own business; they are just trying to take advantage of an opportunity that has come along. This is used in capital leasing. The direct financing lease is accounted for the same way as a sales-type lease and it is also used in capital leasing. In a direct financing lease, the lessor is not a manufacturer or dealer in the item, they...
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...[pic] Credit Application Form |Prepared by FAM (Name): Tarun Makhija |Date Prepared: 18.04.2012 | |BUSINESS INFORMATION | |Existing Customer: Yes No |Phoenix Customer No.: | |Lessee Name: (Full legal name of lessee) |No. of Employees: 500 | |i Media Corp Limited | | |Billing Address: Noida |Business Registration No.: | |Telephone No.: |Fax No.: |Website: | |Business Activities: Media |No. of Years in Business: 50 | |HP Segment: |Type of Business: |Parent Company: (if applicable) ...
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...Lease Treatment week 3 group: Here is each type of lease, the lease classification for the new truck and how each lease is accounted for: | Capital Lease | Operating Lease | Lease criteria - Ownership | Ownership of the asset might be transferred to the lessee at the end of the lease term. | Ownership is retained by the lessor during and after the lease term. | Lease criteria - Bargain Purchase Option | The lease contains a bargain purchase option to buy the equipment at less than fair market value. | The lease cannot contain a bargain purchase option. | Lease criteria - Term | The lease term equals or exceeds 75% of the asset's estimated useful life | The lease term is less than 75 percent of the estimated economic life of the equipment | Lease criteria - Present Value | The present value of the lease payments equals or exceeds 90% of the total original cost of the equipment. | The present value of lease payments is less than 90 percent of the equipment's fair market value | Risks and Benefits | Transferred to lessee. Lessee pays maintenance, insurance and taxes | Right to use only. Risk and benefits remain with lessor. Lessee pays maintenance costs | Accounting | Lease is considered as asset (leased asset) and liability (lease payments). Payments are shown in Balance sheet | No risk of ownership. Payments are considered as operating expenses and shown in Profit and Loss statement | Tax | Lessee is considered to be the owner of the equipment and therefore...
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