Sales-type lease

Sales-type lease

The leasing out of a firm's own equipment, such as a printing company leasing its own presses, thereby competing with an independent leasing company.

Sales-Type Lease

A lease whereby a company rents its own assets that it needs to run its business. For example, an automobile factory may lease its machinery to another factory.
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If any of the five criteria [briefly, 1) ownership is transferred at the end of the lease term; 2) a bargain purchase option for the leased asset exists; 3) the lease term does not commence near the end of, and is primarily for the remaining economic life of, the leased asset; 4) the present value of the lease payments and residual value guarantees is greater than or equal to substantially all of the fair value of the leased asset; or 5) the leased asset has no alternative use to the lessor at the end of the lease term] is met, the lease is evaluated as a sales-type lease.
The second quarter results included total lease rental and finance and sales-type lease revenues of USD 195.
Unrelated to the internal review, the revised financial statements also corrected for an accounting error, primarily for understated interest income, related to a sales-type lease transaction within the Electronic Systems segment and previously identified immaterial errors already recognized in the financial statements but not recorded in the appropriate periods.
GAAP, the lease could be treated as a sales-type lease or direct financing lease for HF.
For a sales-type lease, the selling price is more than the cost of the asset and a sale is recognized by the lessor at the inception of the lease.
Unrelated to the internal review, the financial statement revisions also corrected the accounting for a sales-type lease transaction in the Electronic Systems segment that began in 2004 and ends in 2023 for flight simulators, which increased pre-tax income by USD28 million, primarily for interest income, for periods prior to 2014.
If so, in a sales-type lease, the lessor reports such profit as income at the inception of the lease, offset by commissions or other selling costs.
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