Post Reply 
 
Thread Rating:
  • 0 Votes - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Operating lease or Finance lease? Need your help
08-16-2009, 05:20 PM
Post: #34
 
Before moving further it is essential to know What does it means to Transfer Risks and Rewards incidental to ownership.

Mr. Faisal arleady quoted a para, which is relevent, we should bring it here again.

The classification of leases adopted in this Standard is based on the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. Risks include the possibilities of losses from idle capacity or technological obsolescence and of variations in return because of changing economic conditions. Rewards may be represented by the expectation of
profitable operation over the assets economic life and of gain from appreciation in value or realisation of a residual value.

<b>RisK</b>

In the light of above para If the following conditions are apparent from the lease agreement then the risk is considered to be transferred

1- You use or not, you should pay for it.
2- If any fault occurs in machinery, it is your headache not mine.
3- You get lesser benefit from its usage than expected,your headache

<b>Rewards</b>

In the light of above para If the following conditions are apparent from the lease agreement then the Rewards are are considered to be transferred

1- You get more benefit from its usage than expected, Profit is yours.

2- If the value of the asset inceases, the benefit is yours.

3- If the residual value at the end of lease term increases than estimated today profit is yours

All these conditions must be fulfilled to classify the lease as finance lease, The list is not conclusive and may add some more. because the standard does not speaks Risks and Rewards means this, it says it include this.

Further, it doesnot says it should be transferred 100% it says substantial.

Regards

Waqas Shabbir
Visit this user's website Find all posts by this user
Quote this message in a reply
Post Reply 


Messages In This Thread
[] - kamranACA - 04-01-2009, 08:40 PM
[] - Star - 04-02-2009, 05:53 PM
[] - huu_tung87 - 04-02-2009, 06:24 PM
[] - Star - 04-02-2009, 07:39 PM
[] - huu_tung87 - 04-02-2009, 07:55 PM
[] - Star - 04-02-2009, 08:12 PM
[] - kamranACA - 04-03-2009, 01:51 AM
[] - NYP - 04-25-2009, 02:19 PM
[] - Star - 04-25-2009, 06:26 PM
[] - NYP - 04-25-2009, 07:04 PM
[] - Star - 04-27-2009, 02:40 PM
[] - Abdur.Rehman - 04-29-2009, 07:05 AM
[] - wsafca1 - 08-12-2009, 01:35 AM
[] - wsafca - 08-13-2009, 04:35 AM
[] - kamranACA - 08-13-2009, 07:44 PM
[] - wsafca - 08-14-2009, 02:14 AM
[] - kamranACA - 08-14-2009, 03:16 AM
[] - wsafca - 08-14-2009, 05:47 PM
[] - faisal_desperado - 08-15-2009, 01:06 AM
[] - kamranACA - 08-15-2009, 03:13 AM
[] - wsafca - 08-15-2009, 05:00 PM
[] - wsafca - 08-15-2009, 05:04 PM
[] - wsafca - 08-15-2009, 05:55 PM
[] - kamranACA - 08-15-2009, 06:08 PM
[] - kamranACA - 08-15-2009, 06:10 PM
[] - wsafca - 08-15-2009, 06:29 PM
[] - kamranACA - 08-15-2009, 06:48 PM
[] - faisal_desperado - 08-15-2009, 07:11 PM
[] - kamranACA - 08-15-2009, 07:26 PM
[] - wsafca - 08-15-2009, 10:31 PM
[] - kamranACA - 08-15-2009, 11:42 PM
[] - wsafca - 08-16-2009, 05:01 PM
[] - wsafca - 08-16-2009 05:20 PM
[] - wsafca - 08-16-2009, 05:36 PM
[] - kamranACA - 08-16-2009, 09:00 PM
[] - wsafca - 08-16-2009, 11:19 PM
[] - kamranACA - 08-17-2009, 01:24 AM
[] - wsafca - 08-18-2009, 01:24 AM
[] - kamranACA - 08-18-2009, 05:20 AM
[] - wsafca - 08-19-2009, 12:16 AM
[] - kamranACA - 08-19-2009, 03:33 AM
[] - kamranACA - 08-19-2009, 03:37 AM
[] - applejo88 - 03-17-2011, 07:16 PM

Forum Jump:


User(s) browsing this thread: 1 Guest(s)