Overview on leases: finance lease, operating lease, lease leaseback - Part 2

A subspecies of the lease is the leaseback.

When the owner of an asset needs cash but can not help it, can come to an agreement with a financial intermediary in this way: he sells the good to the intermediary, which allows the seamless leased to it.

In this way, for example, an industry can continue to use his shed or a given plant which can not do without and at the same time make cash with the sale.

Obviously, the income must also remember that we must gradually pay lease payments to the counterparty.

Whatever the form adopted, the lease determines, from the accounting point of view the same consequences. As long as the contract lasts, the value of the property will continue to be accounted for and amortized from the formal owner (lessor), which will mark its proceeds between the lease payments. For the lessee, however, these canons are obviously a cost.

If you have agreed an initial deposit, for both subjects the relative amount (revenue or cost depending on your point of view) shall be spread over the years, in line with the actual duration of the contract, using the method of accounting accruals.

The listed companies and other parties, however, are required to prepare their financial statements according to international accounting standards, according to which the method of lease accounting is much more complex, and involves several complications that reflect more adequately the particular relationship in : it is therefore necessary to look good in the balance sheet of the lessee and not the lessor, split within the principal amount of the royalties from the interest portion, with complex calculations to determine the present value of the fees to be paid ...

 

Over the years, the massive use of leasing tax has pushed the legislature to intervene to give precise rules about taxable income and deductible costs.

The rules, however, have changed several times. According to current provisions, the company leasing the equipment must declare the lease payments, which are fully taxable. Of course, the principle of competence, so the collection date is not relevant: the maxi, for example, should be distributed according to the same accounting rules already described.

 

The accrual principle also applies to the lessee, who is entitled to deduct these costs if documented and related to a business activity. The deduction is, however, some stakes.

Regarding the share capital of the royalties, in fact, it is required that the duration of the contract is at least two-thirds of the amortization period of that asset.

 

Therefore, if a given item is expected at a rate equal to 10%, and therefore the depreciation should be completed in eleven years (considering that the first year the rate is reduced by half), the odds-capital can be deducted only if the contract lasts at least seven years and four months.

However, if the good consists in a means of motor transport, then the duration of the contract must be at least 100% of the amortization period.

If it is a fabricated, finally, the rule applies to the two-thirds, but in all cases the minimum duration must be of eleven. However, if the application of this rule leads to a result exceeding eighteen, it is sufficient that the contract lasts at least, precisely, eighteen and not necessarily over.

As regards, however, the share-interest, the matter falls within the more complex discourse on the deductibility of interest expense according to the method of ROL

 

31/03/2009

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Translated via software

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Source:

Italian version of CercaGeometra.it