Equipment Leasing / Lease Financing
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Define a lease.
Contract where lessor allows lessee use of property for specific period on agreed payment terms.
Which accounting standard governs lease accounting in India?
Ind AS 116 — Leases, effective April 1, 2019.
What are the two types of leases under Ind AS 116?
Finance Lease (Capital Lease) and Operating Lease.
Define finance lease.
Lease transferring substantially all risks and rewards of ownership to lessee.
When is a lease classified as finance lease?
When ownership transfers, bargain purchase exists, term covers major economic life, or PV of rentals equals fair value.
Define operating lease.
Lease not transferring substantially all risks and rewards of ownership to lessee.
Distinguish wet lease from dry lease.
Wet: lessor operates asset, insures, maintains. Dry: lessee operates, insures, maintains.
What is leveraged lease?
Lessor borrows funds to purchase asset, then leases to lessee; three parties involved.
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