Leasing Glossary

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.


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 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.

User of the equipment during the term of the lease.

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.

Referred to as a “Financing Statement” and is filed pursuant to the Uniform Commercial Code.