Leasing is a means of acquiring the use of an asset without having ownership.

Leasing is an alternative to debt and is among the most frequently employed and rapidly growing sources of finance. Using leases, businesses can obtain the use of producing assets without having to raise the cost of the asset in advance. Depending upon the nature of the lease and the underlying asset the lease may be treated for accounting and tax purposes as either an operating lease or a capital lease.

In an operating lease, the lessor (or owner) transfers only the right to use the property to the lessee. At the end of the lease period, the lessee returns the property to the lessor. Since the lessee does not assume the risk of ownership, the lease expense is treated as an operating expense in the income statement and the lease does not affect the balance sheet.

In a capital lease, the lessee assumes most of the risks and benefits of ownership. Consequently, the lease, when signed, is recorded in the capital fund and recognized both as an asset and as a liability on the statement of financial position. It has similar characteristics as a term loan and a conditional sales contract.

In certain certain situations (and generally multi-million dollar transactions), synthetic leases may provide off-balance sheet operating lease treatment accounting purposes, while allowing the client to retain tax ownership of the underlying asset(s). Other benefits provided by synthetic leases may include improved ROA, ROE and leverage ratios.

Balquhain will advise you options for leasing the assets you wish to acquire on the most competitive terms.