Friday, July 10, 2009

conceptual nature of a lease

Capitalize a lease that transfers substantially all of the benefits and risks of property ownership,provided the lease is noncancelable. leases that do not transfer substantially all the benefits and risks of ownership are operating leases.
accounting for lease transaction is based on the economic substance of the transaction, rather than the legal from of it. Essentially in a lease the following is happening - the lessee is buying the asset from the lessor,but rather than paying cash for the asset, the lessee is financing the purchase with a loan from lessor.
largest group of leased equipment involves:
- information technology.
- transportation (trucks,aircraft,rail).
- construction.
- Agriculture.
internal links:
1- this link about what's advantage of leasing ?
2- this link about The two type of leases
3- this link about lessee Accounting for capital leases
4- this link about Lessee accounting for operating leases
5- this link about the accounting criteria for capitalizing leases by the lessee
6- determining if the lease is capital or operating

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