Operating Lease

Knowledge Center

   

Description of Operating Lease. Explanation.

Contents

Premium

 

Definition Operating Lease. Description.


Operating Lease does not transfer the risk or rewards of the leased property to the lessee in any economically substantial way. In an operating lease, the lessor (or owner) transfers only the right to use the property to the lessee. At the end of the lease period, the lessee returns the property to the lessor.


In accounting, operating leases are treated as Off-Balance Sheet Financing: an operating expense, and no asset or liability is recorded as part of the capital of the firm.


In the US, the Financial Accounting Standards Board has ruled that a lease should be treated as an operational lease if it meets none of the following four conditions:

  1. The lease life exceeds 75% of the life of the asset.

  2. There is a transfer of ownership to the lessee at the end of the lease term.

  3. There is an option to purchase the asset at a "bargain price" at the end of the lease term.

  4. The present value of the lease payments, discounted at an appropriate discount rate, exceeds 90% of the fair market value of the asset.


Operating Lease Special Interest Group


Special Interest Group (3 members)


Operating Lease Forum  

Recent topics

  What are the Benefits of Lease Financing for Fixed Assets?
A firm can obtain loans from banks or any other financial institutions to acquire fixed assets. But a good number of companies opt for lease financing...
     
 

Best Practices - Operating Lease

Expert Tips - Operating Lease



Advance yourself in business administration and management



Resources - Operating Lease
 

News about Operating Lease


     
 

Videos about Operating Lease


     
 

Presentations about Operating Lease


     
 

Books about Operating Lease


     
 

More about Operating Lease


     



Accelerate your management career



Compare with: Capital Lease

Special Interest Group Leader

 
 

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing


More on Management  |  Return to Management Dictionary  | 

 

This ends our Operating Lease summary and forum.



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2018 12manage - The Executive Fast Track. V15.0 - Last updated: 11-12-2018. All names of their owners.