Activated cost – The cost of equipment to rent, plus all other « initial direct charges » that can be activated. The total activated cost (or base) is the amount on which the tax benefits for the equipment are based. Price – structure a leasing transaction to obtain the amount of the periodic lease to place a burden on a lesse. A lessor must consider many variables that may include the duration of the lease, the return on lease, the origination fee, the residual value and the tax benefits. Intermediate period – The time between the date of operation of a lease agreement and the start of the planned rental period. Typically, this is a fraction of a month. Progress Payments – Is used on a case-by-case basis when a set of equipment that must be leased in a single contract is delivered over a specified period of time. The deadline is to pay for the first device until the device is put into service. Also known as interim funds.
A bargain purchase option is a clause in a lease agreement that allows the purchaser to acquire the rental asset at the end of the rental period at a price well below its fair value. Elimination – The eventual sale or recovery of renters after return to the owner. Guideline Lease – A tax leasing contract that complies with all IRS guidelines for a « real » lease in accordance with the 2001-28 income calculation procedure. Off-balance sheet financing – Any form of financing, for example. B the operating facility, which, for financial reporting reasons, must not be recorded on a taker`s balance sheet. Minimum rental time – The non-cancellable fixed term of the lease. The minimum duration begins at the service and ends on a given date. The minimum and expected rental conditions may be the same. The minimum term allows the lease to qualify as an accounting leasing (FASB13) as part of the 90% test.
Price (reserved) Balance – Value of the remaining lessor`s investment in rental equipment at the end of the rental period used in the lessor`s price formulas. The (reserved) balance is usually expressed as a percentage of the activated cost. Good business renewal option – An option for extending a lease that, with a viable « fair rent » is sufficiently lower than « fair rental, » so the extension at the beginning of the lease seems reasonably assured. Only buy or renew (PRO) – The PRO is used in combination with a fixed option for purchase or a fair value lease (FMV). At the end of the base tenancy period, the tenant does not have a transfer option for rented appliances. At the expiry of the lease, the purchaser may either acquire the equipment for the specified option or extend the lease for a specified period, usually from 12 to 24 months, after which the purchaser has the option to purchase the equipment from FMV, renew the lease or transfer the equipment. In leasing, this structure is often referred to as First Amendment Lease. Lease Documents – Written forms that attest to the lease transaction, including, but not limited to, the lease, equipment schedule and delivery letter.
Unamortized Lease Balance – The lessor`s (cash) investment, which remains in each lease for the duration of the lease. This balance is reduced or depreciated for the duration of the lease when each payment is received. Part of each lease covers accrued interest (at the rate of return) and part for the reduction of saldores. This balance, plus all accrued interest, must be paid upon termination of a lease (plus, if applicable, early termination fees). Lease Term – Includes the period between in-service date and termination. There are considerable differences in the accounting treatment of capital leasing compared to leasing contracts. When a lease has an option to purchase good deals, the underwriter must count the asset as a lease equal to the current value of all minimum lease payments over the term of the lease. Advances – One or more rental payments made to the lessor at the beginning of the rental period.