In practice, a Financial Lease
comes into play when one party (who will be the lessee) desires to make use of machinery and equipment needed for the exercise of their business, or when they need to modernize the equipment they already posses while not having the money necessary to purchase such equipment.
Reference: LLC "Financial Company for Support and Development of Credit Unions" is engaged in providing loans to credit unions, including financial leasing, forfeiting and factoring, in terms of maturity, repayment and payment of their own funds, as well as borrowing from financial institutions and government of Kyrgyzstan; conducts operations in the financial lease
with members of credit unions of Kyrgyzstan with the obligatory participation of credit unions in the financing of operations on financial lease
The package also includes approval of registration applications for ledger books and is compatible with the tax revisions for financial lease
bookkeeping (for the fiscal year 2007) as required by the Japanese tax system.
A financial lease
is a long-term lease in which the present value of the stream of payments at the inception of the lease approximates the market value of the asset; such a lease is essentially similar to the purchase of the asset using credit.
However, the Yarmouth Report suggests that the underlying financial lease
terms need to be adapted so that their economic worth to an institutional investor can be more readily quantified and analyzed on a standardized basis.