What is LEASE?

Lease financingCox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 1Why own a cow when milk is so cheap?All you really need is milk and not the cowCox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 2The person who wants to manufacture the product needs an equipment to do it but not the ownership of an equipment. The concept of lease financing says Eat the mangoes rather than counting the trees.Cox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 3Lease financing denotes procurement of assets through lease.

The subject of leasing falls in the category of finance.

Leasing has grown as a big industry in USA and UK and spread to other countries in the present century.

In India, the concept was pioneered in 1973.

It is a commercial arrangement whereby the equipment owner conveys to the equipment user the right to use the equipment in return for a rental.

CONCEPTCox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 4Lease is a contract whereby the owner of an asset (lessor) grants to another party (lessee) the exclusive right to use the asset usually for an agreed period of time in return for the payment of the rent. A lease financing is a contract whereby the owner of an asset grant to another party the exclusive right to use the asset usually for an agreed period of time in return for the payment of rent.

The rentals are pre-determined and payable at fixed interval of time.

A lease is an agreement allowing one party to use another property, plant, or equipment for a stated period of time in exchange for consideration.

Lease financingCox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 6Essential elements/Features of leasingEssential elements1. Parties to the contract: there are essentially two parties in a contract of lease financing i.e. the owner (lessor) and the user of the asset (lessee). Lessor as well as lessees may be individuals, partnerships or joint stock companies etc.2. Asset: The subject matter of the lease is the asset. The asset may be anything i.e. an automobile, factory or a building. The asset must, however, be of lessees choice suitable for his business needs.3. terms of contract: the term of the lease is the period for which the agreement of lease remains in operation. Every lease should have a definite period, otherwise it will be legally inoperative. The lease period may sometimes stretch over the entire economic life of the asset (finance lease) or a period shorter than the useful life of the asset (operating lease)4. ownership separate from the user: during the lease tenure, ownership of the asset vests with the lessor and its use is allowed to the lessee. On the expiry of the lease tenure, the asset reverts to the lessor.5. Lease rentals: the consideration which the lessee pays to the lessor for the lease transaction is the lease rental.6. termination of lease contract: at the end of the lease period, the contract may be terminated by any of the modes:The lease is renewed.The asset reverts to the lessor.The asset reverts to the lessor and the lessor sells it to the third party.The lessor sells the asset to the lessee.Financial leaseThe lessor transfers to the lessee substantially all the risks and rewards incidental to the ownership of the asset. It involves the payment of rentals over an obligatory non-cancellable lease period. In such leases, the lessor is only the financier and is usually not interested in the assets. It is a long term non-cancellable lease.It ensures the lessor for amortisation of entire cost of investment plus the expected return on the capital outlay during the term of the lease.Types of assets included under such lease are lands, building, heavy machinery etc.Operating leaseIt is one which is not a financial lease. It is a short term cancellable lease.In this, the lessor does not transfer all the risk and rewards incidental to the ownership of the asset and the cost of the asset is not fully amortised during the primary lease period. So under this type of lease, contract lease period is always less than economic life of the asset.The lessor provides services attached to the leased asset such as maintenance, repair and technical advice. It is also known as service lease. Operating lease is primarily used for computers, office equipments, trucks etc.PARTIES TO THE LEASECox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 13Single investor leaseThere are only two parties to the lease transaction, the lessor and the lessee. Arrangement for assets of huge capital outlay. It is a 3 sided arrangement. Lesser borrows a part of purchase cost of the asset from the third party i.e. lender. The lender is paid off from the lease rentals directly by the lessee and surplus cash after meeting the claims of the lendor goes to the lessor. Lessor acquires the asset with maximum contribution upto 50% and rest is financed by lenders.Leveraged lease financingCox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 15Cox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 16 in this, the lessee is already the owner of the asset. He, under the lease agreement, sells the asset to the buyer.

The buyer leases back the same asset to the owner (now the lessee) in consideration of lease rentals. under the sale and lease back, the lessee not only retains the use of the assets but also gets funds from the sale of the assets to the lessor.Sale and lease backCox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 17Cox (2006), Happy companies have robust growth in revenues, strong balance-sheets, and healthy profits that reflect genuine business success, not phony bookkeeping. And they share other important traits as well. They abide by high ethical standards, which is a key to their solid success. They don't obstruct the flow of information to shareholders, but rather view the shareholder as the ultimate owner and the ultimate boss. They choose directors on the strength of their abilities, character, and capacity for independent judgment. And their internal controls work well, so that the company's executives can take immediate corrective action when something goes wrong. Undoubtedly, a lot of stress has been given on maintaining high ethical standards, thinking beyond the business, observing transparency for shareholders, bringing independent judgement and accountability from directors as well as management. This is how corporate governance has been defined since long, with the literature consistently boosting the fact that it actually leads to hike in revenues and business success.Better corporate governance is likely to improve the performance of firms, through more efficient management, better asset allocation, better labour practices etc (Claessens, 2006). Good corporate governance has positive effects on a firm (Lynall et al., 2003). 18Domestic leaseA lease transaction is classified as domestic if all the parties to the agreement are domiciled in the same country.

International leaseIf the parties to the lease transaction are domiciled in the different countries, it is known as international lease. Import lease: the lessor and the lessee are domiciled in the same country but the equipment supplier is located in a different country.

Cross-border lease: when the lessor and the lessee are domiciled in different countries, the lease is classified as cross border lease. The domicile of supplier is immaterial.Advatantages