An operating lease is a contractual arrangement in which the right to possess and use an asset is acquired for a period of time that is significantly shorter than the asset’s econo…
What is a lease?
A lease is a contractual financing arrangement in which one party – the lessee – is granted the right to possess and use a specific asset or group of assets owned by another party…
What is a lease purchase?
A lease purchase is a full-payout equipment leasing arrangement with a lease term equal to the asset’s estimated economic life and a bargain purchase option for the lessee to exerc…
What is a lease asset?
The equipment (personal property) or real estate (real property) that is the subject of a lease and currently leased is a leased asset. In general, any identifiable, tangible and…
What is a finance or capital lease?
Any lease that is not classified for accounting purposes as an operating lease is a finance lease. A finance lease (more commonly known as a “capital lease” in the US) is a noncan…
What is a conditional sale?
A conditional sale is the sale of an asset with title to the asset withheld from the buyer by the financing manufacturer, bank or finance company until all payment for the asset ha…
How do lessors classify leases under ASC 842 and IFRS 16?
Accounting standards require lessors to identify lease transactions that transfer to the lessee control over the leased asset and substantially all of the risks and rewards inciden…
How do lessors classify leases under ASC 840 and IAS 17?
Except for real estate leasing, leases are classified by the lessors on the basis of an assessment of the characteristics of the arrangement at the inception or modification of the…
How are leases classified by lessees under ASC 842 and IFRS 16?
Under both IFRS 16 and ASC 842 lessees are required to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. The new accountin…
How are leases classified by lessees under ASC 840 and IAS 17?
IAS 17 requires finance lease classification when the lease term is a “major part” of the asset’s economic life or the present value of the lease payments is equal to “substantiall…