can any body tells me the concept with detailed example behind the treatment of asset given on lease by lesser as Manufacturer or dealer as per as 19.
thks.
Hi,
A lessor manufacturer/dealer is a person who has got an assets which is not generally financed by other institutions in the market. He himself sales it out or gives it on rental basis. Thus the transaction of lease under this type includes two elements from the view point of lessor manufacturer/dealer. First is normal profit portion he would have generated had he sold the assets on outright basis. Second is the finance income.
Let me give you the example also, its correct one and best suitable for the topic. You must have heared about digital camera used for shooting movies. These camera has a special feature. The movie shot through such camera needs special projector to run it in a theater (to avoid piracy). Such special projector is very costly and not all the movies are shot using such technology. As the projector is new to the market and it takes hard to resale it in future, banks and financial institutions are not willing to finance it. Thus the manufacturer himself gives it to lessee on FINANCE lease and earns profit on sale as well as finance income. I hope this clears your doubt. Yeah the difference between normal lease and lessor manufacturer is very narrow, one has ro go by case to case basis.
Regards,
Rajiv Shah
CAclubindia
