MECHANICS OF LEASING

Three aspects of leasing

Legal aspects of leasing

Procedural Aspects of leasing

Accounting aspects of leasing

Legal aspects of leasing

Obligations of lessor
Possession of asset and authority to
use to lessee
Obligations of lessee
For the payment of lease rental
Take the responsibility of the leased
asset
Return the leased asset to the lessor
after the
expiry of the lease period

Contents of lease
agreement

Description of the asset, lessor and the

lessee
Place and time of the delivery of asset
Time and amount of lease rental
payment
The responsibility of lessee for taking the
possession and delivery of the asset
The right of the lessee to have the
benefit of assets

The responsibility of lessee for

registration, repair and maintenance of
the asset
The responsibility of lessee to take the
insurance on the lessor's behalf
The responsibility of lessee to return the
asset on the lease period's expiry
The lease renewal option for the lessee

Procedural Aspects

The lessee enjoys the right to select the

asset
The lessee negotiates over the lease
term
The lessee has to approach the leasing
company and submit the application for
the asset
The lessor and lessee have to sign the
agreement of lease

Accounting treatment of leases

The operating leases are added in the

books of lessor as advantage and the
payment that is earned on the lease is
considered to be the expense of lessee
and income of the lessor. The finance
leases, on the other hand, are
capitalized in the lessee's books.

Leasing as financial decision

making

Procedure Of Leasing Financial

Decision

Identify limiting factors

cost
time
Develop alternatives for action
bank loan
issue securities
Analysis of alternatives

Selection of best alternative acquisition

Experience
Experiment
Research and analysis
Implementing the solution
Assessment decision