operating lease

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Operating lease

Short-term, cancelable lease. A type of lease in which the contract period is shorter than the life of the equipment, and the lessor pays all maintenance and servicing costs.

Operating Lease

A lease in which the lessee maintains residence or usufruct of the leased property or asset while the lessor may claim a tax deduction on depreciation. For example, if one rents an apartment for a certain period of time and the lessor repossesses the apartment at the end of the lease, is a common example of an operating lease. See also: Off-balance-sheet financing.

operating lease

A short-term lease (such as that of a cable television connection box on a monthly basis) in which rental payments are made by the lessee and full ownership rights are kept by the lessor. An operating lease contrasts with a capital lease in which ownership of the asset effectively passes from the lessor to the lessee.

operating lease

An important accounting and income tax concept having to do with the determination of whether a lease (usually of personal property, but sometimes of real property) is a true lease, or whether it is a disguised lending arrangement. The operating lease is the true lease, and 100 percent of the payments are treated as expenses for accounting purposes and tax deductibility purposes.Sometimes called an off-balance sheet lease,meaning not that the lease is hidden or disguised,but it appears on the profit and loss statement rather than the balance sheet. Contrast with capital lease.In order to qualify as an operating lease,the transaction must meet the following requirements:

• The lease term is less than 75 percent of the estimated economic life of the equipment.

• The present value of lease payments is less than 90 percent of the equipment's fair market value.

• The lease cannot contain a bargain purchase option (i.e., purchase option for less than the fair market value).

• Ownership is retained by the lessor during and after the lease term.

References in periodicals archive ?
Consistent with current GAAP, classification as a finance (capital) or operating lease will primarily dictate the measurement and recognition of cash flows and expenses associated with leases.
This ratio is unchanged because there's no change in the lessee's lease expense for an operating lease from ASC 840 to ASC 842.
13's lease classification criteria to ensure the lease would be accounted for as an operating lease.
Operating lease revenue for the second quarter of 2015 increased by USD11.
An operating lease, or true lease, may allow the lessee to purchase the asset at the end of the lease term, but does not require it.
New Delhi, June 14 -- Avis India, the international car rental company in the country has launched Avis Lease, an operating lease service for the Indian corporate sector.
Summary: Global marine terminal operator DP World has signed a new 15-year operating lease extension at Port Botany in Sydney, Australia.
For example, a lease requiring payments equaling 89 percent of an asset's fair value would be treated as an operating lease while one with payments equaling 90 percent would be a capital lease, despite the two arrangements being very similar from an economic perspective.
From an asset finance perception, the extended range of options now available to companies are: 1 - Contract hire This is effectively an "off balance sheet" operating lease, with the optional inclusion of repairs, servicing/maintenance and asset/facility management services.
The council is proposing a 30-year operating lease with Kingswood.
However, a look at equipment operating lease statistics only shows that the vast majority of the transaction volume is comprised of small and mid-sized transactions of less than $250,000, with average lease terms of less than four years, whose capitalized value would be less than 0.