19 Lease Financing

19 Lease Financing - 19 - 1 CHAPTER 19 Lease Financing...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
19 - 1 Types of leases Tax treatment of leases Effects on financial statements Lessee’s analysis Lessor’s analysis Other issues in lease analysis CHAPTER 19 Lease Financing
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
19 - 2 The lessee, who uses the asset and makes the lease, or rental, payments. The lessor, who owns the asset and receives the rental payments. Note that the lease decision is a financing decision for the lessee and an investment decision for the lessor. Who are the two parties to a lease transaction?
Background image of page 2
19 - 3 Operating lease Short-term and normally cancelable Maintenance usually included Financial lease Long-term and normally noncancelable Maintenance usually not included Sale and leaseback Combination lease What are the four primary lease types?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
19 - 4 Leases are classified by the IRS as either guideline or nonguideline. For a guideline lease, the entire lease payment is deductible to the lessee. For a nonguideline lease, only the imputed interest payment is deductible. Why should the IRS be concerned about lease provisions? How are leases treated for tax purposes?
Background image of page 4
19 - 5 For accounting purposes, leases are classified as either capital or operating. Capital leases must be shown directly on the lessee’s balance sheet. Operating leases, sometimes referred to as off-balance sheet financing, must be disclosed in the footnotes. Why are these rules in place? How does leasing affect a firm’s balance sheet?
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Leasing is a substitute for debt. As such, leasing uses up a firm’s debt capacity. Assume a firm has a 50/50 target capital structure. Half of its assets are leased. How should the remaining assets be financed? What impact does leasing have on
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 26

19 Lease Financing - 19 - 1 CHAPTER 19 Lease Financing...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online