The date that is specified on the Delivery and Acceptance
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
(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.
First day of the month following the acceptance date.
A transaction whereby the user is treated as owner of the
equipment and takes interest and expense deductions.
The period during which an asset is expected to be useful in the
trade or business.
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.
Financial Accounting Standards Board
The criteria set forth by FASB to determine the financial
accounting standards on accounting for leases.
A person or business promising to perform all of the lessee's
A document issued by the lessee’s insurer to provide coverage
of the asset during its lease period.
The rent charged between the acceptance date and the
commencement date of the lease term on a 30-day pro rata basis.
Used in conjunction with a master lease whereby the lessee can
add equipment to the lease without negotiating a new lease.
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.
The fixed term of the lease.
User of the equipment during the term of the lease.
The owner of the equipment that is being leased to a lessee.
A lease whereby the lessee can add multiple schedules of
equipment without having to negotiate a new lease contract.
The lessee is responsible for all ancillary costs associated
with the leased asset, outside of the 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.
Represented by a series of future lease payments expressed in
The value of a leased asset at lease termination.
A term by which a lessee can sell currently installed equipment
and lease it back.
A type of lease that allows the lessor to claim ownership, for
tax purposes, and the lessee to claim rental payments as tax
Referred to as a “Financing Statement” and is filed pursuant
to the Uniform Commercial Code.