Hi all,
Can nebody explain me finance and operating lease in simplified manner ie in simple words, the differentiation between the two and the funda of converting operating lease into financial lease (7 or 8 times)???
1 Replies
Payal Gupta
(article assistant)
(176 Points)
Replied 10 April 2010
finance lease is that type of lease in which ownership is transferred from lessor to lessee at the end while operating lease ownership is not transferred i.e, basically on rental basis
particularly there is no funda but accordinf to AS-19 if it satisfies the given conditions it is said to be finance lease:-
- if agreement provide that ownership is transferred at the end
-PV of MLP= fair value of asset
-lease asset has economic life
-lease asset is of specialised nature i.e, only lessee can use it
-lessee has option to purchase the asset at a price lower than fair value
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