Lease finance structures
Lease finance structures

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Lease finance structures
  • Operating leases
  • Finance leases

Operating leases

  1. A pure operating lease provides the lessee with the use of an asset for the term of the lease in consideration for the payment of rent to the lessor. At the expiry of the lease term, the lessee is obliged to return the asset to the lessor and has no further legal or economic interest in the residual value of the asset.

  2. Under an operating lease, the risk in relation to the asset or equipment falls upon the lessor rather than the lessee throughout the lease term (which is typically for a period of less than ten years).

  3. An operating lease will be treated as being 'off balance sheet' in the accounts of the lessee, which may increase the chances of the lessee being able to obtain additional funding lines.

  4. A synthetic operating lease is a lease which, although intended to finance the eventual acquisition of an asset by the lessee, is treated as an operating lease in accordance with the applicable accounting standards. The lessee will seek to show tha

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