Accounting and Finance for Lawyers
An operating lease gives the lessee the right to use some property for a period of time, but he has no ownership in or obligation for the property.
This is not ideal as it makes one's debt ratio bigger.
- The lessee gets ownership at the end of the lease term.
- The lessee has the right to purchase the property for a "bargain price"—one dramatically below any possible sense of the asset's market value.
- The lease covers at least 75% of the property's useful life.
- The lease payments amount to at least 90% of the fair market value of the property.