Difference between a finance lease and an operating lease?
February 5th, 2020
According to IAS 17 two types of leases are identified namely Finance lease and Operating lease. The distinction between the two primarily resulted from the implications of one of the important accounting concept Substance over form.
Finance lease is a lease agreement in which substantially all the risks and rewards incidental to ownership of an asset are transferred to the lessee from the lessor. Where lessee is the person who acquired an asset from lessor for use and lessor is the person who is the owner of the asset and has handed over the asset to lessee to earn rentals.
On the other hand operating lease is a lease agreement which is NOT a finance lease. In short, a lease agreement in which risks and rewards associated with the asset are not transferred to the lessee and stays with the owner of the asset i.e. lessor.
Even though the lessor is the rightful owner of the asset and most often owners are responsible to bear any loss and obtain economic benefits associated with the asset but sometimes the risks and rewards associated with the assets are transferred to another person by the owner himself without transferring the title of ownership of the asset. Same is the case with the finance lease.
Source — internet
I count 2 there thanks anyway
Trying to get someone else to do your homework for you huh?
Try splitting the paragraphs in half !!