Where a credit bureau focus on consumer credit, a credit rating agency (CRA) is an independent company that evaluates and quantifies the credit risk of banks, nonbank corporations…
What is a credit model?
A credit model is an analytical method that models the credit default process based on available information used to determine the probability of default on a credit arrangement (l…
What is a credit loss model?
A credit model used to determine credit losses that have or will probably arise from a credit portfolio in order to calculate the allowance for loan and lease losses (ALLL) and to…
What is a credit default swap?
A credit default swap (CDS) is an over-the-counter bilateral contract of a notional amount and specified term in which the seller receives a series of periodic premium payments fro…
What is a credit bureau?
A credit bureau is an independent agency that researches, collects, analyses and organizes credit information primarily on consumers and small businesses (SMEs) and maintains and s…
What is a credit application?
A credit application is a form submitted to a prospective lender or lessor that provides credit information on a prospective borrower or lessee, respectively – and occasionally a g…
What is a company group?
A parent company is a business entity that owns or controls one or more other companies, typically through the ownership of 50% or more of the voting rights in the companies. A co…
What is a commercial real estate lease?
A commercial real estate lease is a lease contract between the owner (landlord) and occupant (tenant) of commercial real estate in which the landlord grants to the tenant the right…
What is a collateral assignment?
Collateral assignment is the transfer of the rights to the rental payments from and a security interest (lien) in a leased asset by the asset’s owner and lessor to lenders – the le…
What is a chapter 11-style reorganization? What is an administration?
A type of reorganization based on US Chapter 11 procedures is a Chapter 11-style reorganization. A Chapter 11-style reorganization is a distressed-debt restructuring in which an i…
What is a certificate of acceptance?
As soon as delivery of the asset is made to the lessee, the lessee must acknowledge acceptance of the asset and authorize the lessor to pay the asset’s supplier. Delivery and acce…
What is a captive lessor?
A captive lessor is a division, subsidiary or joint venture established with a leasing company by a manufacturer or dealer with the primary purpose of providing the lease financing…
What is a cancellable lease?
A cancellable lease is generally an operating lease (rental) that may be terminated by either the lessee or the lessor without penalty. A finance lease is a noncancellable lease in…
What is a bargain purchase option? What is a bargain renewal option?
A bargain purchase option (BPO) is the contractual right of a lessee to purchase the leased asset at a fixed price that is substantially below its expected fair value when the opti…
What is a bank lessor?
A bank lessor is a bank or bank affiliate that offers leasing as part of its product mix through its regular lending units, a special leasing unit within the bank, a separate leasi…
What are trade and nontrade receivables?
Trade receivables are amounts owed by customers for goods and services sold in the course of a firm’s ordinary business (trading) activities, including all accounts receivable and…
What are the methods of asset depreciation?
A method of calculating, allocating and expensing the cost of an asset such that the asset will lose an equal amount of value each year of its useful life is straight-line deprecia…
What are the lessor’s costs in leasing?
A costs that results directly from and is essential to the origination or acquisition of a transaction and that the entity would not have incurred had that transaction not occurred…
What are the key principals of accrual accounting?
Accrual basis of accounting recognizes revenues, expenses, gains and losses and the related increase or decrease in assets and liabilities in the period when the accounting event o…
What are the general accounting constraints?
The materiality is the accounting constraint stipulating that any information of such importance that its inclusion in or omission from financial records could have an impact on fi…
What are the fees in leasing?
A fee is payment for a service as compensation for costs, typically expressed in basis points (bp), with 1 bp equal to one hundredth of one percent (0.01%). Income that is generat…
What are the comparative analysis techniques?
Vertical analysis is a financial statement analysis technique that compares different items in a particular financial statement – income statement, balance sheet or cash flow state…
What are the common lease purchase options?
A fixed-purchase option (FPO) is the lessee’s contractual right to buy the asset at the end of the original lease term for a fixed percentage of its original cost. The lessee’s op…
What are the cash flow statement categories?
The cash flow statement shows the results of transactions in three categories that are sources and uses of cash: Operating cash flow – Net cash provided by and used for operating a…
What are the basic classes of equity?
Common stock is the residual equity in a company in that all other financial claims against the firm have priority over this class of equity, it entitling its holders to dividends…