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    Financial Leases and Off Balance Sheet Financing

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    1. Could you discuss some of the advantages of Financial Leases, and please contrast where this approach might be used.

    2. The issue of "off Balance Sheet" activities has come under acute scrutiny because of the Enron debacle. What would some of the implications be of off balance sheets financing with respect to tax and accounting issues, as well as the pros and cons given contemporary accounting concerns.

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    Solution Preview

    A lease is an agreement conveying the right to use property, plant, or equipment usually for a stated period of time. The owner of the property is referred to as the lessor, and the renter is the lessee.

    Advantages Of Financial Leasing
    1. Operational advantages to the lessee:
    Leasing ready-to-use equipment may be more attractive if the asset requires lengthy preparation and set-up.
    Leasing avoids having to own the asset that will be required only seasonally, temporarily or sporadically.
    Leasing for short ...

    Solution Summary

    This explains the concept of Financial Leases and Off Balance Sheet Financing