Search results

1 – 10 of over 14000
Article
Publication date: 16 May 2019

Jim Musumeci and Thomas O’Brien

The purpose of this paper is to survey the lease vs buy coverage in leading managerial finance textbooks and to clarify the impact of tax rates and borrowing rates.

Abstract

Purpose

The purpose of this paper is to survey the lease vs buy coverage in leading managerial finance textbooks and to clarify the impact of tax rates and borrowing rates.

Design/methodology/approach

The survey uses “plain vanilla” lease vs buy scenarios to critique and clarify particular issues in the textbook presentations.

Findings

The survey finds: a lone text shows that there can be a gain from leasing if the lessee’s tax rate is higher than the lessor’s, which challenges the “conventional wisdom” maintained in all the other texts; some textbook examples attribute an overall benefit to leasing to the tax rate difference, but the benefit is actually due to a borrowing rate difference, and borrowing rate differences may be a more important source of leasing benefits than tax rate differences.

Originality/value

The survey provides insights that are not well known and should be useful to instructors and practitioners.

Details

Managerial Finance, vol. 45 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 10 August 2010

Rachel Knubley

The International Accounting Standards Board (IASB) is proposing a fundamental change to the way lease contracts are accounted for by both lessees and lessors. This article aims…

5141

Abstract

Purpose

The International Accounting Standards Board (IASB) is proposing a fundamental change to the way lease contracts are accounted for by both lessees and lessors. This article aims to summarise the proposed change.

Design/methodology/approach

This article explains why the IASB decided to add a project on lease accounting to its agenda; outlines the proposed approach to lessee accounting; discusses how the proposals will affect lessors of real estate; and describes the next steps in the project.

Findings

The proposed changes described in this article will require lessees to recognise assets and liabilities in respect of operating leases on their balance sheet. This will affect lessees of real estate, because many property leases are currently classified as operating leases. The proposed changes will also have a significant effect on any lessor that carries investment property at cost rather than fair value.

Originality/value

Interested parties have the opportunity to comment on the proposals summarised in this article when the IASB publishes an exposure draft of the proposed changes in the third quarter of this year.

Details

Journal of Property Investment & Finance, vol. 28 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 2 June 2021

Alan Teixeira

The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have given relief to lessees in response to the coronavirus (COVID-19…

Abstract

Purpose

The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have given relief to lessees in response to the coronavirus (COVID-19) pandemic. However, it is not clear why any relief from the requirements in International Financial Reporting Standards (IFRS) or the Accounting Standards Codification (ASC) should be necessary. The purpose of this paper is to highlight weaknesses in how the IASB and FASB developed their leases Standards, and why those Standards are not robust enough to cope with a shock to the economic system.

Design/methodology/approach

The COVID-19 relief suspends some features of the leasing requirements rather than changing them. What if other economic or regulatory events cause the same circumstances to arise?

Findings

Have COVID-19 exposed weaknesses in the leasing standards that should have been avoided when they were developed or is COVID-19 the problem?

Originality/value

Analysis of actual board discussions and staff papers is unusual and provides insights into the standard-setting process.

Details

Pacific Accounting Review, vol. 33 no. 2
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 1 January 1979

John D. Martin and Paul F. Anderson

The lease versus purchase decision has intrigued and perplexed both the academician and the practitioner for many years. The enigmatic nature of this problem stems largely from

Abstract

The lease versus purchase decision has intrigued and perplexed both the academician and the practitioner for many years. The enigmatic nature of this problem stems largely from the fact that lease‐purchase is a financial hybrid containing both financing and investment elements. The decision is unique in that the amount of financing provided by the lease alternative is not a matter of managerial discretion. Leasing commits the firm to what is, in effect, 100 per cent nonequity financing of the asset's acquisition. A purchase decision, on the other hand, allows the firm some flexibility in determining the optimal debt‐equity financing mix. This necessarily raises the question of how a firm should deal with the issue of financial risk differences between the alternatives.

Details

International Journal of Physical Distribution & Materials Management, vol. 9 no. 4
Type: Research Article
ISSN: 0269-8218

Article
Publication date: 1 February 1983

Jeffrey Greenwood

The past 15 years have seen a substantial increase in the number of institutions established for the purpose of long‐term investment, and in the size of the aggregate funds…

Abstract

The past 15 years have seen a substantial increase in the number of institutions established for the purpose of long‐term investment, and in the size of the aggregate funds available for that purpose. The new investing institutions are mainly pension funds and life offices, and their rise has been due to the introduction and growth of new occupational pension schemes. The same period has seen a marked change in investment policy on the part of almost all investing institutions, so as to give increasing prominence to investment in real property alongside the traditional areas of investment in government securities and in the equity markets. This policy change has been influenced by the concomitant growth of inflation, and the belief that real property offers the best protection against its damaging effects.

Details

Property Management, vol. 1 no. 2
Type: Research Article
ISSN: 0263-7472

Article
Publication date: 1 January 1989

Stewart D. Hodges

Major financial lease contracts are commonly written on a variable interest rate basis. The conditions of this sort of lease include an interest rate variation clause which…

Abstract

Major financial lease contracts are commonly written on a variable interest rate basis. The conditions of this sort of lease include an interest rate variation clause which provides for adjustments to be made to the rentals when interest rates change. Such adjustments are usually made periodically by applying the change in the interest rate (from the rate at the beginning of the lease) to the amount of the lessor's investment in the lease.

Details

Managerial Finance, vol. 15 no. 1/2
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 1 June 1996

John B. White

Believes that a feature of most closed‐end automobile leases is the right to purchase the car for a specified price at the termination of the lease. This characteristic of a…

1070

Abstract

Believes that a feature of most closed‐end automobile leases is the right to purchase the car for a specified price at the termination of the lease. This characteristic of a closed‐end autombile lease is similar to a European call option and is transferred to the lessee at no explicit charge. Develops a methodology to calculate the value of the call option feature embedded in closed‐end automobile leases. Concludes that the rational lessee should lease autos that generate low option values.

Details

Journal of Consumer Marketing, vol. 13 no. 3
Type: Research Article
ISSN: 0736-3761

Keywords

Article
Publication date: 1 January 1989

John D. Blake

From the proposals for a system of capitalising finance leases included in ED 18 in 1976 to the issue of SSAP 21 in 1984 has been a long haul. Much time has been given to a…

Abstract

From the proposals for a system of capitalising finance leases included in ED 18 in 1976 to the issue of SSAP 21 in 1984 has been a long haul. Much time has been given to a variety of technical problems, particularly the difficulties of defining a lessor's net cash investment in a lease. However the major delaying factor has undoubtedly been the debate over whether capitalisation of finance leases should be required. For the first time the Accounting Standards Committee (ASC) has explicitly laid out, and called for comment on, “economic consequence” issues. This article is concerned with exploring the nature of these issues and the way the ASC has responded to them.

Details

Managerial Finance, vol. 15 no. 1/2
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 1 October 2002

Philip G. Skinner, Abe J. Schear and Seth S. Katz

From time to time, clients ask counsel and brokers about the pros and cons of using an assignment versus a sublease to effect a transfer of possession and a transfer of…

Abstract

From time to time, clients ask counsel and brokers about the pros and cons of using an assignment versus a sublease to effect a transfer of possession and a transfer of obligations with respect to leased premises. With about equal frequency, questions come up regarding the differences between assignments and subleases, and ‘whether those differences really make a difference’ after all is said and done. While assignments and subleases are both means to achieve substantially similar ends, they do yield different legal and business results. The purpose of this paper is to explain and discuss some of the similarities and some of the distinctions between assignments and subleases, both from a legal perspective and from business and practical perspectives, and to discuss some of the reasons that the different parties involved in such transactions may prefer, or wish to select one of these transaction forms over the other.

Details

Journal of Corporate Real Estate, vol. 4 no. 4
Type: Research Article
ISSN: 1463-001X

Keywords

Article
Publication date: 1 October 2004

Jack G. Kaikati

Synthetic leases, used by some retailers to finance rapid expansion, could be ticking time bombs that might blow up anytime in the USA. This paper has three objectives. First, it…

1162

Abstract

Synthetic leases, used by some retailers to finance rapid expansion, could be ticking time bombs that might blow up anytime in the USA. This paper has three objectives. First, it provides an overview of the financing technique in the USA by tracing its origin and pin‐pointing its advantages and drawbacks. It shows that the drawbacks tend to outweigh the benefits. Second, it discusses how some retailers were red‐flagged for using it and how they responded to such undesirable exposure. The third objective is to highlight the more stringent accounting regulations recently imposed by the Financial Accounting Standards Board (FASB) on synthetic leases in the USA.

Details

International Journal of Retail & Distribution Management, vol. 32 no. 10
Type: Research Article
ISSN: 0959-0552

Keywords

1 – 10 of over 14000