...Leasing Customer Inserts His/her Name Customer Inserts Name of Tutor Customer Inserts Grade/Course (December 11, 2011) Outline ➢ Introduction ➢ Changes in Leasing accounting ➢ Effect of the changes on the industry ➢ Conclusion A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset for a certain time. Leasing is a common activity and agreement, which appears on company’s financial statement all the time, no matter fortune 500 companies or startup firms. Most of the companies will rent tangible property including office and machines that is called rental agreement. When it comes to accounting, leasing becomes one of the most important sources of the financial statement. Since 1977, Financial Accounting Standards Board (FASB) set accounting standards to regulate leases that show on financial statement. However, current accounting rules for leases unable to meet the needs of users of financial statements because they do not provide a truthful representation of leasing transaction (Financial Accounting Standards Board). As a result, Financial Accounting Standards Board (FASB) and International Financial Reporting Standards (IFRS) decided to create joint project to redefine the accounting rules for leases (IFRS 1). Therefore, the draft of new accounting standard were made in 2010 and expected to be...
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...Vocabulary Triple-Net Full Payout Leases Operating Leases Capital Leases Purchase Options Traditional Leasing vs. Venture Leasing Venture leases structured to support start-ups Traditional leases often require a substantial deposit Traditional leases are often limited to a small subset of assets Venture leases are often a mix of debt and equity Hi-Tech Firms Have Large Equipment Needs Lowers a Firm's Equity Capital Needs Leasing Is a Low Cost Source of Capital – Bank Loans Require Excess Collateral Lessor Has a Strong Claim in a Default New Firms Don't Need Equipment Tax Deductions, But Get Them with a Capital Lease Venture Leasing Partnerships GP Compensation Similar to VC Fund Differ from VC Partnerships due to Timing of Cash Flows and Nature of Investors Cash Flows Begin Quickly – Lowers Risk Non-Profits Are Taxed on Lease Payments Received by Partnership – Unattractive Major Investors: Individuals, Insurance Cos. & Foreign Institutions Don't Take Board Seats Have Close Ties to VC Organizations Require Firm to Have Several Rounds of Prior Funding Including VC Participation Rely on VC to Monitor and Advise Firm Repeated Dealings with VC Organization Reduces Moral Hazard Risk for Venture Leasing Organization Venture Lease Negotiations Size & Timing of Equipment Purchases Timing of Lease Payments – Takedown, Balloon Payments & Security...
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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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...Hello, A car purchase of lease is one that will be a depreciating cost no matter the choice. Buying a car is great but lets take a good look at the misconception and mistakes of buying versus leasing. When you buy a car one usually finances the contract for the car for at least sixty months. Yes I am buying the car but I must maintain the car with general maintenance ( which is not always included in the initial price of the car ). Then it usually takes at least forty eight months to gain equity for the depreciating asset. This is a rule of thumb used by the car dealers and the lenders. This is why using zero down payments always puts the buyer in a negative equity situation for the duration of a long period of time. One would ask what is the big deal? The big deal is that you are stuck with the car in the negative equity situation and can not trade or attempt to trade because of the negative equity situation. You can trade but once again the wallet will suffer as one will need a substantial down payment. There is also variables to consider of the depreciation of the car as the miles put on it and the overall shape of the car when trading. Leasing is a viable option for few as the credit rating for the consumer to lease must be outstanding and usually have a score of 750 as a rule. The irony of the market is that only eight percent according to the National Automobile Association qualify. You do not take the risk of depreciation and the bank is the owner and takes all the...
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...According to the Merriam Webster Dictionary, lease can be defined as: “A contract by which one conveys real estate, equipment, or facilities for a specified term and for a specified rent.” In layman terms however, leasing refers to a contract between two parties- the lessee to acquire the use of an asset with payment structured over time. The lessee chooses an asset and finds a lessor who will acquire it for him/her and enters into a non-cancellable, long term contract with the lessor to use and gain benefits from the fixed asset. The fixed asset is leased out for a stipulated time period and all costs such as maintenance, taxes and insurance are borne by the lessee. The structured, periodical payments made to the lessor are usually designed...
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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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...Islamic economics in distance with the conventional economics. Because of this difference in nature, Islamic Financial Institutions (IFIs) have different types of contracts as practiced by conventional financial institutions. One of the types of contracts entered by IFIs is the Ijarah contract. Ijarah contracts are also known as Islamic leasing. Basically, this study is done in order to understand more the nature of leasing according to Islamic principles, and at the same time, the differences of ijarah with conventional leasing. In addition, this study also aims to identify the types of ijarah practiced by IFIs in Malaysia and also to see how Malaysian IFIs disclosed their ijarah financing in comparison to their counterparts in Bahrain IFIs. This is because as one ummah, it is important to have a standardized standard that is Shariah compliant and could be compared with all the other IFIs. Analysis was done based on the financial reports of the IFIs to observe the differences in the disclosures. The result obtained from the observations then will be used to suggest some improvements that could be done to improve the IFIs. Ijarah (Islamic Leasing) Ijarah contract could be defined as a contract that transfers the usufruct of an item...
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...Leasing vs. Buying a Vehicle The great debate to lease or buy a car? Which one of the two options is the smarter or he better choice? The answer to this question is both and neither are the best options. Confusing one may think so, however, the best way to get to the answer is to ask yourself what is important to you. Every person is different with different values and priorities that determine for them whether leasing or buying is the answer. There are people who desire to drive a new vehicle every few years with little or no maintenance costs. Some people have a strong desire to own the vehicle, as opposed to lower upfront costs with no ownership. One of the two of the biggest temptations for many people to lease verses buying are that the monthly costs to lease are cheaper than the monthly payments to buy a car. The other is that they are able to have a new car every 2-3 years, as opposed to the people who purchase. People who purchase generally hold on to the car for an additional 2 years after the last car payment. Let’s review the pros and cons of leasing. The advantages of leasing are it offers lower monthly payment and the ability to drive a new car with all the new bells and whistles every 2-3 years (ehow). There is a tax benefit of paying lower taxes since the individual is paying the taxes on the monthly payments verses the full value of the car. From the two examples so far it appears that leasing is a great situation, and everyone should lease; once...
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...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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...Resumen: CONTABILIZACION DEL ARRENDADOR 16. Con el objeto de reflejar adecuadamente el espíritu económico de la transacción, el arrendador deberá contabilizar el contrato de leasing financiero en forma similar a la venta de un bien del activo fijo, añadiendo una nota explicativa a los estados financieros, en la cual indicará las características y condiciones relevantes del contrato en referencia. 17. Desde el punto de vista del arrendador, pueden distinguirse dos situaciones: a) Arrendadores que no son fabricantes ni distribuidores y que solamente se dedican al financiamiento de operaciones de leasing. b) Arrendadores que son fabricantes o distribuidores de los productos que ofrecen en leasing. 18. El arrendador determinará el valor actual del contrato descontando el valor de las cuotas periódicas y de la opción de compra a la tasa de interés que se considere apropiada en las circunstancias, según se señala a continuación: a) Si existe una tasa de interés explícita en el contrato deberá utilizarse dicha tasa, a menos que ella sea significativamente inferior a la tasa promedio de mercado, vigente a la fecha de la firma del contrato, para colocaciones a largo plazo en condiciones similares a las del contrato de leasing (plazos y moneda o unidad crediticia - pesos, dólares, unidades de fomento, etc.), en cuyo caso deberá utilizarse esta última. b) En ausencia de una tasa de interés explícita en el contrato, deberá observarse lo siguiente: 1. Si el arrendador no...
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...UNIVERSITATEA ‘ANDREI ŞAGUNA’ FACULTATEA DE ŞTIINŢE ECONOMICE SPECIALIZAREA: FINANTE BANCI AN II SEMESTRUL I REFERAT LIMBA ENGLEZĂ ADOCHITEI SIMONA DORINA 2012 CONTENTS Definite Articles ………………………………………………1 Indefinite Articles …………………………………………….3 Zero Articles …………………………………………………..4 Definite Articles The definte article – the We use THE: when there is only one of something: What is the longest river in the world? -“the” is used before “same” (the same) Your pullover is the same colour as mine. These two photographs are the same. -go to the cinema, to the theatre I often go to the cinema but I haven’t been to the theatre for ages. When we say THE CINEMA/THE THEATRE < we do not necessarily mean one particular cinema or theatre. BREAKFAST/LUNCH/DINNER We do not normally use “the” with the names of meals .. What did you have for breakfast? We had lunch in a very nice restaurant. What time is dinner? BED WORK HOME It’s time to go to bed now. I sat down on the bed. Go to work/be at work/ start work/finish work Ann didn’t go to work yesterday. THE+ ADJECTIVE We use THE+ adjective (without a noun) to talk about groups of people, especially: the young the old the elderly...
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...Hybrid, Derivative Securities, and Leasing analysis Hybrid Security Adalah: salah satu bentuk pendanaan yang memiliki karakteristik mirip dengan LTD dan Common stock. Contoh: Preferent stock dilihat dari sifat dividen saham preferent menyerupai LTD karena karakter dividen PS sebagai beban tetap seperti membayar bunga LTD. Sedangkan dilihat dari dividen yang dibayarkan kepada pemegang saham, maka PS mirip dengan common stock. Derivative Security Adalah: suatu securitas yang nilainya ditentukan oleh sekuritas lain yang menjadi underlying-nya, seperti: • Option: call option & put option • Warrant Covertible bond Leasing: Adalah: Proses dilakukan perusahaan untuk pengadaan aktiva tetap, dimana perusahaan harus menggadakan penjanjian dengan lessor untuk menyewa aktiva tetap selama periode tertentu, membayar lease payment dan berpengaruh terhadap pengurangan pembayaran pajak. Keterangan: ▪ Lessor = Pihak pemilik asset yang disewakan ▪ Leassee = Pihak penyewa asset-nya leassor 1. Operating Lease Karakteristik: • Kontrak bersifat cancellation • Maintenance cost ditanggung leasor • Umur kontrak < umur ekonomis asset • Lease payment tidak dapat menutup initial cost • Aset yang disewakan merupakan high tech asset • Pihak leassor merupakan leasing company • Memiliki Renewal option atau opsi untuk memperbaharui kontrak oleh lessee • Memiliki Purchasing option atau opsi untuk membeli...
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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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...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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...Bangladesh is a developing country, but the national calamity and political unrest sluggish the industrial growth as well as economic growth of the country. Inspite of all these hindrance the growth of leasing companies is a significant indication of our bright prospects. The traditional sources of funds of our country in the financial market are – the Commercial Banks, DFIs and the stock exchange. But these sources are not enough to effectively meet the growing demand of capital investments for industrialization of the country. And the backdrop of such scenario, leasing companies came forward in the 80s to serving as an alternative source of financing. Leasing is now a growing industry in many developing countries as well as Bangladesh. In spite of sluggish economic activities the growth of the leasing industry is significant. Lease is a contract between the owner and the user of assets for a certain time period during which the second party uses an asset in exchange of making periodic rental payments to the first party without purchasing it. Under lease financing, the lessee regularly pays the fixed lease rent over a period of time at the beginning or at the end of a month, 3 months, 6 months or a year. At the end of the lease contract the asset reverts to the real owner. Leasing is an important new method of financing. Non-Bank Financial Institutions (NBFIs) play a significant role in meeting the diverse lease financial need of various sectors of an economy and thus contribute...
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