To address concerns regarding the impact that a transition from operating to capital lease
accounting would have on the resulting expense recognition pattern, the proposal provides two types of capital leases
, each with a different expense recognition pattern.
As part of the amended and restated credit agreement, the company can raise its capital leasing capacity from USD30m to USD75m, supporting its planned conversion of up to USD50m of existing operating leases into capital leases
Under capital leases
, a company records the lease rent obligation as debt and a related lease asset.
In return DHL will assume financial responsibility, retroactive to 31 January 2009, for ABX Air's obligations under capital leases
for five Boeing 767-200PC aircraft that are currently used on DHL's US network.
The auditor also recommended that the county develop a policy of using capital leases
that reflect the acquisition and incurrence of obligations when entering into long-term, build-to-suit leases and ensure that the proper documents are obtained when leasing buildings.
6 Off-Balance-Sheet Transactions -- Determine if there are operating leases that should be capital leases
or capital leases
that should be operating leases.
The current rule prohibits capital leases
and permits operating leases made under normal terms and conditions.
are agreements that transfer the risks of ownership to the tenant without transferring the title and under the conditions in which the tenant acts in most respects as the "owner" of the property.
Since an operating lease is not debt, and it tends to carry lower monthly payments than capital leases
, it is sometimes the only way a firm can get the equipment it needs.
The types of financial services used by small businesses can be grouped into the following broad categories: (1) liquid asset services, which are checking accounts and savings-type accounts, (2) credit lines, loans, and capital leases
, which are lines of credit, mortgages, motor vehicle loans, equipment loans, capital leases
, and miscellaneous loans, and (3) financial management services, which are transaction services, cash management services, credit-related services, brokerage services, and trust and pension services.
Last month we discussed the difference between operating leases and capital leases
Certain lease agreements that are treated as operating leases for tax purposes are classified by lessee as capital leases
for financial reporting purposes.