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| Ownership: | Ownership of the asset might be transferred to the lessee at the end of the lease term. | Ownership is retained by the lessor during and after the lease term. |
| Bargain Purchase Option: | The lease contains a bargain purchase option to buy the equipment at less than fair market value. | The lease cannot contain a bargain purchase option. |
| Term: | The lease term equals or exceeds 75% of the asset's estimated useful life. | The lease term is less than 75 percent of the estimated economic life of the equipment. |
| Present Value: | The present value of the lease payments equals or exceeds 90% of the total original cost of the equipment. | The present value of lease payments is less than 90 percent of the equipment's fair market value. |
| Risks and Benefits: | Transferred to lessee. Lessee pays maintenance, insurance and taxes. | Right to use only. Risk and benefits remain with lessor. Lessee pays maintenance costs. |
| Accounting: | Lease is considered as asset (leased asset) and liability (lease payments). Payments are shown in Balance sheet. | No risk of ownership. Payments are considered as operating expenses and shown in Profit and Loss statement. |
| Tax: | Lessee is considered to be the owner of the equipment and therefore claims depreciation expense and interest expense. | Lessee is considered to be renting the equipment and therefore the lease payment is considered to be a rental expense. |
| What options do I have to finance attachments? Adding attachments doesn’t have to add to your financial load. Download the PDF for more information |
Download PDF |
| What options do I have to finance attachments? Adding attachments doesn’t have to add to your financial load. Download the PDF for more information |
Download PDF |
* Ag-Power, Inc. does not provide financial advice. Please visit with your personal accountant to discuss the specifics of your operation.
