Leasing@Glance

8/8/2019 Leasing@Glance

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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 !

Leasing@Glance

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