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 ?
Total assets include a $25.9M operating lease right of use asset due to the adoption of the Accounting Standards Update 2016-02 in the first quarter ending March 31.
Depreciation on ROU and interest expense on the liability will be charged to the income statement instead of showing the operating lease payment as an expense.
BANKING AND CREDIT NEWS-October 15, 2018-Calcbench fintech leader introduces operating lease report
If the leases failed all four tests, the lease was classified as an operating lease in which the lessee simply "rented" an asset without booking an asset and liability.
Those plans and schedules benefit from an operating lease, which offers the greatest flexibility," Rice says.
This report updates and replaces the prior criteria report titled "Global Rating Criteria for Aircraft Operating Lease ABS," dated April 19, 2017.
Fly Leasing Limited (NYSE: FLY), a global provider of aircraft leasing, has announced that all agreements relating to FLY's acquisition of 55 Airbus narrow-body aircraft and seven CFM engines on operating lease, and the option to purchase an additional 20 Airbus A320neo family aircraft, were approved by the shareholders of AirAsia Group Berhad, the company said.
Consistent with current GAAP, classification as a finance (capital) or operating lease will primarily dictate the measurement and recognition of cash flows and expenses associated with leases.
This ratio is unchanged because there's no change in the lessee's lease expense for an operating lease from ASC 840 to ASC 842.
The lessee will account for leases as either a finance or operating lease, which the exposure draft refers to as type A and B leases, respectively.
Summary: Investec Bank, a lender in the aviation market, closed a US$ 1 billion operating lease transaction with Emirates Airline, as per a statement by Investec.