- Bonds
- Recognition and Measurement of Bonds
- Bond Amortization, Interest Expense, and Interest Payments
- Derecognition of Debt
- Role of Debt Covenants
- Presentation and Disclosures Related to Debt
- Leasing Vs. Purchasing Assets
- Capital Leases and Operating Leases
- Lessee Accounting
- Effects of Leases on Selected Financial Reporting Items for Lessees
- Lessor Accounting for Leases
- Lessors and Sales-Type Capital Leases
- Lessors and Direct Financing Capital Leases
- Effect of Leases on Financial Statements for Lessors
- Disclosures for Capital and Operating Lease
- Defined Benefits Plans vs. Defined Contribution Plans
- Pension Expense (both GAAP & IFRS) for the Income Statement
- Defined Benefit Plans & the Company Balance Sheet
Leasing Vs. Purchasing Assets
A firm may choose to purchase outright a long-lived asset, such as an airplane or an office building, giving the firm full benefit and risk from asset ownership; however it may also enter into a lease agreement with another firm, to lease an asset and assume partial benefit and risk associated with the asset.
A Lease represents a contractual agreement between the party owning the asset who wants to earn a return on its investment (the “Lessor”) and the party desiring to use the asset (the “Lessee”). The lessor grants the lessee the right to use the asset in exchange for a series of lease payments. The lessee expects that it will earn a return on the use of the asset that is greater than the cost of the lease. In many respects, this transaction is similar to a company purchasing an asset and financing the purchase with the issuance of a bond.
Lessee is the “borrower” of the leased asset. Lessor is the “lender” of the leased asset.
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