A simple rental agreement.
A rental agreement where ownership is not intended. An operating lease is not recorded in the general ledger accounts and therefore the asset and liability will not appear on the balance sheet. A lease that in substance is the purchase and financing of an asset is a capital lease. To Top
Under this type of lease, ownership of the leased goods stays with the lessor (the company leasing out the goods).
A lease under which the lessor maintains and finances the property; also called a service lease.
One where the risks and benefits, as well as ownership, stays with the lessor.
These leases have a buyout clause at the end of the term. True operating leases can be 100% tax deductible. This means that all monthly payments can be written off as an expense and the equipment does not need to be depreciated over a term of years.
From a financial reporting perspective, a lease that has the characteristics of a usage agreement and also meets the criteria established by the FASB. Operating leases also include leases in which the lessor has taken a significant residual position in the lease pricing. With an operating lease, the lessor is generally taking a risk that at the end of the term the lessee will either purchase the leased property, renew the lease, or the leasing company can remarket the leased property for its residual value.
For accounting purposes, an operating lease is any lease which is not a capital lease. These are generally used for short term leases of equipment. The lessee can acquire the use of equipment for just a fraction of the useful life of the asset.
a lease in which the lessee has not taken on the risks and rewards of owning and operating the asset
a lease in which the lessor does not transfer to the lessee all the benefits and risks incidental to ownership of the asset
a lease other than a financial lease
a lease that often allows the lessee to make smaller periodic payments than with a term loan
a lease under which the lessor effectively retains substantially all the risks and benefits incidental to ownership of the leased property
an agreement to make payments for a specific amount of time for the right to use the equipment owned by the leasing company
an agreement to rent equipment for use in your business for a fixed period
an arrangement where the lessee has the use of an asset in return for the payment of a rental fee
a short-term, cancelable lease
a shortterm lease or usage agreement that allows the company (lessee) to acquire use of an asset for a fraction of the asset's useful life
a type of lease in which the financier retains ownership of the leased equipment
a type of lease, normally involving equipment, whereby the contract is written for considerably less than the life of the equipment and the lessor handles all maintenance and servicing
a pure rental agreement with no documented residual amount. Goods can be returned to the financier when the agreement expires.
the term used to describe an off balance sheet lease. May also be used to describe a short-term lease in which a client can acquire the sue of the equipment for a portion of its useful life.
A lease in which the lessor, in determining the lease rates, projects that the equipment will have a necessary market value at lease-end to provide for an adequate rate of return.
A type of lease, normally involving equipment, classified as a rental not as a purchase over time. An operating lease must be shown as an expense in the Expenses Detail, unlike a capital lease, which is treated as a long-term debt.
The motor vehicle is leased to the University by a Fleet Manager and provided fully maintained to the staff member.
Any lease that is not a Capital Lease. Generally used with equipment that rapidly depreciates or becomes obsolete in a short period of time. The Lessor books and depreciates the equipment as an asset, and the Lessee expenses the lease payments (usually classify these payments as an operating expense). An operating lease is considered an off-balance sheet liability and contains a provision to purchase the equipment at the end of the lease for the Fair Market Value. This is typically considered the most tax friendly form of leasing. Please contact your accountant.
An equipment item that is leased whereby ownership is not transferred to the lessees, in effect no purchase is made, is called an operating lease. If, under the terms of the operating lease agreement, the state agency as lessee were responsible for insuring the property, then the asset would be recorded within this category. Include only operating lease property (property from capital leases should be recorded under the appropriate category, such as furnishings and equipment or automobiles and motorcycles). Maintain sufficient detail to identify property and location including value. However, enter only the total value for which the State is obligated for insurance purposes.
For finance accounting purposes a lease which does not meet the criteria of a Finance Lease as defined by accounting standard SSAP21. The risks and rewards lie with the lessor and the lessee can not be liable for any residual risks on the assets. An operating lease is accounted for in commercial terms by not showing the leased equipment as an asset or the payments as a liability on a balance sheet. Payments are accounted for by the lessee as an operating expense.
Any lease that is not a capital or finance lease. An operating lease usually finances equipment for less than its useful life, and at the end of the lease term the lessee can return the equipment to the lessor without further obligation.
A lease where the risks and benefits incidental to ownership are not substantially transferred to the lessee.
Generally, a short-term lease where the lease payments are less than 90% of the value of the underlying asset.
A lease which is treated as a true lease (as opposed to a loan) for book accounting purposes. An operating lease is accounted for by the lessee without showing an asset (for the equipment) or a liability (for the lease payment obligations) on his balance sheet. Periodic payments are accounted for by the lessee as operating expenses of the period.
A lease other than a finance lease.
Any lease that is not a capital lease. These are generally used for short term leases of equipment. The lessee can acquire the use of equipment for just a fraction of the useful life of the asset. Additional services such as maintenance and insurance may be provided by the lessor.
subleasing arrangement, by which a lessee (tenant) leases the property to a sub-lessee who actually occupies the leased premises. For more information, see the "Overview of Leases" article in the "Real Estate In-Depth" section.
From a financial reporting perspective, a lease that has the characteristics of a usage (rental) agreement and also meets certain criteria established by the FASB. Such a lease is not required to be shown on the balance sheet of the lessee. The term is also used to refer to leases in which the lessor has taken a significant residual position in the lease pricing and, therefore, must salvage the equipment for a certain value at the end of the lease term in order to earn its rate of return. The criteria for meeting FASB 13 classification of an operating lease are: 1. Title for the equipment does not automatically transfer to the lessee during, or by the end of, the lease term. 2. There is no bargain purchase price. 3. The non-cancelable lease term is lesser than 75% of the asset's economic life. 4. The present value of the minimum lease payments, discounted at the lessor's interest rate implicit in the lease, is less than 90% of the leased asset's FMV.
Any lease which leaves the risk of ownership substantially with the lessor (i.e. HSBC Bank). Under current accounting rules the assets in an operating lease remain on the balance sheet of the lessor (HSBC Bank) and not the lessee (a business customer)). Contract hire is a form of operating lease. See also Leasing.
A form of lease that is largely similar to rental. Leased assets are recognized in the lessorâ€(tm)s balance sheet and capitalized.
A short-term lease in which the risks of ownership remain with the lessor and whose payments are recorded as rent expense.
Rental of an asset over a term of more than one year that doesn't meet the definition of a capital lease.
A means of providing equipment over a period of time, which usually will not exceed 7 years, by regular payment avoiding the expenditure of a capital sum.
A lease that does not essentially result in the purchase of the asset.
Any lease that is not a capital or finance lease. See FMV lease (above). Also see First Capital's " Lease Types" page for a more complete discussion of this topic.
An operating lease is a lease where the lessor retains most of the risks and rewards of ownership. (See also finance lease)
A lease where the lessor does not recover the full cost of the asset out of the rentals paid during the primary period, but it looks to the residual value of the asset for part of the recovery.
The definition depends upon the context in which it is used. For financial accounting purposes, as per FAS 13, an operating lease is one which does not meet the criteria of either a capital lease or direct financing lease. Generally, the term can refer to a relatively short-term lease which allows the lessee/user to acquire use of an asset for some fraction of the useful life of the asset. The term is also used to describe a lease in which the lessor provides certain services such as maintenance, insurance, and payment of personal property taxes (unlike in a net lease). The term is derived from short-term leases in which the lessor provided a human "operator" along with the leased equipment (e.g., in construction equipment leases). See Lease Accounting section for further information.
A short-term cancellable lease arrangement, which is not fully amortised.
A lease that is not classified as a capital or finance lease based on the ability to meet the FASB 13 guidelines. This lease is treated as off-balance sheet financing.
From a financial reporting perspective, a lease that has the characteristics of a usage agreement and also meets certain criteria established by the FASB. Such a lease is not required to be shown on the balance sheet of the lessee. The term also is used to refer to leases in which the lessor has taken a significant residual position in the lease pricing and, therefore, must salvage the equipment for a certain value at the end of the lease term in order to earn its rate of return. ACKAGER The leasing company, investment banker, or broker who arranges a leveraged lease.
A lease arrangement that is treated as an annual operating expense under generally accepted accounting principles, as opposed to a Capital Lease.
Method of hiring assets over periods less than the expected lifetime of those assets. An operating lease is accounted for by the lessee without showing an asset or a liability on his balance sheet. Periodic payments are accounted for by the lessee as operating expenses for the period
A Lease that does not meet the criteria for a capital lease under FASB 13 and qualifies for Off-Balance Sheet Financing.
Short-term, cancelable lease. A type of lease in which the period of contract is less than the life of the equipment and the lessor pays all maintenance and servicing costs.
Another accounting classification for a lease. A lease that does not meet the criteria for a capital lease is an operating lease. With an operating lease, the lessor is generally taking a risk that at the end of the term the lessee with either purchase the leased property, renew the lease, or the leasing company can remarket the leased property for its residual value.
Lease under which the lessor effectively retains substantially all the risks and benefits incident to ownership of the leased asset (see finance lease).
For financial accounting purposes, a lease which does not meet the criteria of a finance lease a defined by SSAP 21. Risk and rewards of ownership lie with the lessor The lessee cannot be liable for any residual risks on the assets An operating lease is accounted for by the lessee without showing an asset (for the equipment) or a liability (for the lease payment obligations) on its balance sheet. Periodic payments are accounted for by the lessee as operating expenses of the period.
Lease in which the term of the contract is less than that of the equipment and the lessor pays all the maintenance costs
A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset.
Regular rental of property between the lessee and lessor for a fee. An operating lease does not satisfy the criteria for a capital lease.
A lease accounted for by the lessee without showing an asset for the lease rights or a liability for the lease payment obligations. Rental payments of the lessee are merely shown as expenses of the period. The asset remains on the lessor's (owner) books, where rental collections appear as revenues. Contrast with Capital Lease.
This differs from a finance lease in that rental relates to the use of the equipment rather than the acquisition cost. Leases are "wet" if the lessor provides operational staff, servicing and so forth, and "dry" if the equipment alone is provided.
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. An operating lease is commonly used to acquire equipment on a relatively short-term basis. Thus, for example, an aircraft which has an economic life of 25 years may be leased to an airline for 5 years on an operating lease.