Operating Leases/Rental Agreements
Why commit your working capital to equipment which may become rapidly obsolete? Operating Leases / Rental Agreements can offer you a lower monthly rental than other forms of finance and also allow you to upgrade your equipment at any stage.
The financier retains most of the risks and benefits of ownership of the asset. The client has no residual value liability and the equipment must be returned to the financier at the end of the lease period. The financier then bears the risk of profit or loss on its eventual sale, although the lessee must return the goods in good condition. The Lessee can, of course, make an offer to purchase the leased goods at any time during or at the end of the lease period.
For accounting purposes, the lease liability is recognised in the notes to the financial statements only. The asset and lease liability are off balance sheet under current accounting standards.