Post on 10-Apr-2018
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Arun
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` Lease:- A lease represents a contractual arrangement where
the lessor grants the lessee the right to use an asset in return
for periodical lease rental payaments.
` Ex: land , building, machinery.
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` Huge capital
` No loan and interest payable to bank
` Free of bother of official matters
`
Only rent is given` No depreciation charge
` Only for short period
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` Finance lease
` Operating lease
` Sale and lease back lease
`
Direct lease` Single investor lease
` Leveraged lease
` Domestic lease
`
International lease
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`
Financ
e lease:-A finance lease or capital lease isessentially a form of borrowing.
` (lease transfer ownership to the lease expires.
` The lease lasts for at least 75 % of the asset economic life.
` The lessee can buy the asset for a bargain price when the lease
expires.)
` Operating lease:-This lease for short period and lessee canterminate anytime the agreement . Lessor provides the
operating service and take resposibility to insuring and
maintaining.
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` Sale and lease back lease:-A vendor sells the asset to a
leasing company and lease it back. Leasing company chargehigh price .
` Direct lease:-Direct lease can be two types` (a) Bipatrite :- This can be either finance lease or operating
lease.
` (b) Tripatrite:-Here three party should be involved supplier ,lessor and lessee.
` Single investor lease:- A single investor funds the totalamount of the asset by raising mix of debt and equity.
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` Leveraged lease:-In leverage lease both lessor and lessee
fund the amount of asset(equity +debt).
` Domestic
lease:-A lease where all participant lessor andlessee are from the same country.
` International lease:- A lease where all participant lessor
and lessee are from different country.
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` This is covered under Indian contract act sec 148. There is no
seprate regulation for lease in india.
` Typical contents of lease agreement:-
` description of lessor, lessee and asset.
` Amount ,time , and place of payment of rental.
` Lessor and lessee responsibility.
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` Sales tax provision
`
Procedural aspects` Income tax provision
` Accounting aspect of leasing
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` Reduced Cost
` Better use of tax benefit
` Lower cost of obsolescence risk
`
Matching of lease rental to cash flow` No formality to complete document
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` No ownership
` Regular payment of rent
` Lease Termination
`
Qualifying
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` Depends on industry types ( small/big)
` Period of use of the assets
` Ownership of asset (hire purchase system)
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Thank you !