Lease

Lease

1. Capitalized

   • If it transfers substantially all the risks and benefits incidental to ownership of the leased asset.
   • Requirements
     • The lease contract transfers ownership of the asset to the lessee at the end of the lease term. The leased term covers most of the part of the economic life of the leased asset. The leasee can cancel the leased contract, among others.
   • The lessor have to complain with: a) the charge of the minimun payments is insured. b) No significant contingencies exist respect to the nonrefundable payments to be incurred by the lessor.
   • Accounting
     • To the lessor
       • The sum of minimum payments, must be recorded as the gross investement in the lease. The discount rate that should utilize the lessor to determine the present value must be the interest rate implicit in the contract.
     • To the lessee
       • The lessee should register a capitalized lease as an asset and a correlative obligation. To the calculation, the lessee should utilize the interest rate implicit in the contract.

2. Operational

   • If the risks and benefits associated with the leased asset remain with the lessor.
   • Requirements
     • All contracts that not have requirements to consider as capitalized leases, are operational leases
   • Accounting
     • To the lessor
       • The rents are reported as income during the lease period in a systematic way. Variable rents are reported as income as they accrue.
     • To the lessee
       • The rents have to be charged to the results during the lease period in a systematic way. Variable rents are charged to results as they accrue.