Capital V Operating Lease

ACG Brokers Both Capital & Operating Leases

To Large, Medium and Small Companies

 

 

 What is a Lease? A Lease is a contract in which one party (the “Lessor”) gives another party (the “Lessee”) the exclusive right to use and possess its property or equipment (the “Leased Property” or “Leased Equipment”) for a specified period.

A Capital Lease: is considered to have the same economic characteristics as a Term Loan. A Capital lease would be considered a loan for accounting purposes.  A lease that meets any of the following criteria  will be deemed to be a Capital Lease.

1. The life of the lease is 75% or greater of the assets useful life.

2. The lease contains a purchase agreement for less than market value.

3. The lessee gains ownership at the end of the lease period.

4. The present value of lease payments is greater than 90% of the asset’s market value.

 

An Operating Lease is:  A True Lease or rental for accounting purposes.
The choice of lease type classification will have an important impact on a firm’s financial statements.

All other leases would fall under this category.
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