Leasing Glossary
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Acceptance Date
The date that is specified on the Delivery and Acceptance
Certificate |
Capital Lease
The Lessee treats this type of lease as a purchase if it meets
any of the following criteria:
(a) The present value of the required lease payments are equal
to or greater than 90%of the estimated fair market value of the
asset at lease inception.
(b) The lease term is equal to or greater than 75% of the
estimated economic life of the leased asset.
(c) The lease contains a bargain purchase option (less than fair
market value).
(d) The lease transfers ownership of the asset to the lessee at
the end of the lease term. |
Certificate of Delivery and Acceptance
A document whereby the lessee acknowledges that the equipment
has been delivered, is acceptable, and is in good working
condition in accordance with the lease. |
Commencement Date
First day of the month following the acceptance date. |
Conditional Sale
A transaction whereby the user is treated as owner of the
equipment and takes interest and expense deductions. |
Economic Life
The period during which an asset is expected to be useful in the
trade or business. |
Equipment Schedule
A document that describes in detail the equipment being leased. |
Fair Market Value Lease
At initial lease termination the “fair market value” is a
negotiated price between a willing buyer and a willing seller. |
FASB
Financial Accounting Standards Board |
FASB 13
The criteria set forth by FASB to determine the financial
accounting standards on accounting for leases. |
Guarantor
A person or business promising to perform all of the lessee's
obligations. |
Insurance Certificate
A document issued by the lessee’s insurer to provide coverage
of the asset during its lease period. |
Interim Rent
The rent charged between the acceptance date and the
commencement date of the lease term on a 30-day pro rata basis. |
Lease Line
Used in conjunction with a master lease whereby the lessee can
add equipment to the lease without negotiating a new lease. |
Lease Rate
The annual interest rate implicit in minimum lease payments. |
Lease Rate Factor
The rate used to determine a monthly payment for a given
equipment cost and is expressed as a decimal fraction multiplied
by the equipment cost. |
Lease Term
The fixed term of the lease. |
Lessee
User of the equipment during the term of the lease. |
Lessor
The owner of the equipment that is being leased to a lessee. |
Master Lease
A lease whereby the lessee can add multiple schedules of
equipment without having to negotiate a new lease contract. |
Net Lease
The lessee is responsible for all ancillary costs associated
with the leased asset, outside of the lease. |
Operating Lease
FASB defines an operating lease as one that does not meet the
criteria of a capital lease. (See Capital
Lease). With this type of lease the entire monthly lease
payment can be expensed. |
Present Value
Represented by a series of future lease payments expressed in
today’s dollars. |
Residual Value
The value of a leased asset at lease termination. |
Sale-Lease Back
A term by which a lessee can sell currently installed equipment
and lease it back. |
True Lease
A type of lease that allows the lessor to claim ownership, for
tax purposes, and the lessee to claim rental payments as tax
deductions. |
UCC-1
Referred to as a “Financing Statement” and is filed pursuant
to the Uniform Commercial Code. |
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