- A -
Accelerated Cost
Recovery System (ACRS):
The tax
depreciation, or cost recovery, method for Internal Revenue Service
purposes that governs all depreciable property placed in service
between January 1, 1981 and December 31, 1987. Introduced by the 1981
Economic Recovery Tax Act, ACRS replaced the Asset Depreciation Range
(ADR) system and was replaced itself by the Modified Accelerated Cost
Recovery System (MACRS) of the 1986 Tax Reform Act.
Accelerated Depreciation:
Any depreciation method that allows for greater deductions or
charges in the earlier years of an asset's depreciable life, with
charges becoming progressively smaller in each successive period.
Examples of accelerated depreciation are the double declining
balance and sum-of-the-years digits methods
Acknowledgment:
A formal statement by a party before a notary public to the
effect that they have executed a specific instrument or document.
Add-On:
A transaction to add related equipment to an existing lease.
Typically, this term is used when the new equipment is financed
using the same end of term structure as was used in the
underlying transaction (e.g., Fair Market Value, $1.00 Purchase
Option) and the add-on's lease term will terminate on the same
date as the original transaction
Additional Insured:
A party other than a party in whose name insurance is issued
who is also protected against losses covered by such a
policy.
Advance lease payments:
One or more lease payments required to be paid to the
lessor at the beginning of the lease term. Lease structures
commonly require a nominal payment to be made at lease
signing.
Agent:
A person who has legal authority to act for and represent
another party in dealing with third parties.
Agreement:
The bargain of the parties in fact as found in their
language or by implication from other circumstances.
All-risk insurance:
This is an insurance policy that covers an insured
against loss from any peril other than those
specifically excluded by the terms of the policy.
Alternative Minimum Tax (AMT):
An alternative, separate tax calculation based on
the taxpayer's regular taxable income and increased
by the taxpayer's preferences for the year. Among
the preferences that can increase the taxpayer's
alternative minimum taxable income is the
accelerated portion of depreciation. After certain
exemptions and offsets, the taxpayer is required to
pay the larger of the regular tax or the
alternative minimum tax.
Annual Percentage Rate (APR):
The effective interest rate over the course of a
year, taking into account compounding and other
fees.
Appraisal:
An evaluation of the value of a specific item
of property, usually as conducted by a person
with expertise about that property.
Appreciation:
The increase in value of an asset over time.
Asset:
An item of value.
Audited Financial Statements:
An audit is a methodical and objective
examination of accounts and items that
support the financial statements of the
company. It requires the CPA to study the
association's accounting system and
evaluate the risk of misstatement from
error or fraud. An audit also requires
the CPA to test the books and financial
records to see if they are producing
reliable financial data. Unlike a review,
an audit requires the CPA to vouch
numbers to source documents, confirm
balances or other information, trace
transactions through the records. An
audit is more work and provides a greater
degree of assurance that the financial
statements are "fairly stated in
accordance with generally accepted
accounting principles."
- B
-
Balloon Payment:
A payment on a loan that is unusually
large in comparison to the other
payments on the loan. A balloon
payment is usually the final payment
on a loan.
Bargain Purchase Option:
A renewal option that will, as a
certainty, be exercised because the
consideration to be given for the
purchase is so nominal as to be
insignificant.
Basis Points:
Units of 1% with each unit equal
to 0.01% (1/100%). For example,
"50 basis points" is
equal to .5% and "200 basis
points" is equal to 2%.
Bill of Sale:
A written document that
evidences the transfer of
ownership of property.
Book Value:
For accounting purposes, the
value of an asset according to
depreciation schedules which
may or may not be market
value.
- C -
Capital Lease:
A lease that either: 1)
automatic transfers title
to the equipment at the end
of the lease; 2) contains a
bargain purchase option; 3)
has a lease term greater
than 75% of estimated
economic life of the
equipment; or 4) is
structured such that the
present value of the lease
payments is greater than
90% of the equipment's fair
market value. A Capital
Lease must be treated
essentially as an
installment purchase for
book accounting purposes.
Therefore, a Capital Lease
is both the borrowing of
funds and the acquisition
of an asset. A Capital
Lease does not provide the
tax advantages that an
operating lease does. For
more detailed information,
please consult paragraph 7
of FASB 13.
Cash Flow:
Income inflows less
expense outflows,
including debt service,
over a specified period.
Certificate of
Delivery and
Acceptance:
A document that is
signed by the lessee to
acknowledge that the
equipment to be leased
has been delivered and
is acceptable. Many
lease agreements state
that the actual lease
term commences once the
D&A has been
signed. After the
D&A is signed, the
vendor is paid.
Certificate of
Insurance:
A statement from an
insurance company or
its agent that a
certain policy has
been written. The
certificate usually
summarizes the policy’s
coverage.
Closed-end
Lease:
A lease that does
not contain a
purchase or renewal
option, thereby
requiring the
lessee to return
the equipment to
the lessor at the
end of the initial
lease term.
Co-lessee:
An additional
lessee to the
lease. The lease
will usually
provide that the
co-lessee is
jointly and
severally liable
on the lease with
the lessee. Most
leases to
non-public
companies with
individuals who
own 20% or more
are personally
guaranteed.
Collateral:
Security,
usually
property (real,
personal, or
intangible)
pledged to
secure
performance of
an agreement.
Commercial
Lease:
A lease in
which the
lessee has
entered into
the lease
transaction
for business
or commercial
purposes;
business
lease.
Commitment
Fee:
A fee that
is required
by the
lessor at
the time
the
proposal or
commitment
is accepted
by the
lessee in
order to
lock in a
specific
lease rate
and/or
other lease
terms. A
commitment
letter is a
document
prepared by
the lessor
that
details its
commitment,
including
rate and
term to
provide
lease
financing
to the
lessee.
This
document
precedes
final
documentation
and may or
may not be
subject to
other
conditions,
such as
lessor
credit
approval,
guarantors,
collateral,
etc. This
fee is
typically
at least
$2,000 or
3% of the
asset cost.
Conditional
Sales
Contract:
An
agreement
for the
purchase
of an
asset in
which the
lessee is
treated
as the
owner of
the asset
for
federal
income
tax
purposes.
This
entitles
the
lessee to
the tax
benefits
of
ownership,
such as
depreciation,
but the
lessee
does not
become
the free
and clear
owner of
the asset
until all
terms and
conditions
of the
agreement
have been
satisfied.
Compiled
Financial
Statements:
A
compilation
is the
presentation,
in the
form of
financial
statements,
of the
representations
of the
owners
or
managers
with no
assurance
made by
the
CPA. An
accountant
generally
performs
few, if
any,
procedures,
and it
is
substantially
less
than a
review
services
report.
For
this
reason,
the
accountant's
compilation
report
will
include
wording
similar
to the
following:
"A
compilation
is
limited
to
presenting
in the
form of
financial
statements
information
that is
the
representation
of
management.
We have
not
audited
or
reviewed
the
accompanying
financial
statements
and,
accordingly,
do not
express
an
opinion
or any
other
form of
assurance
on
them."
Consumer
Lease:
A
lease
in
which
the
lessee
has
entered
into
the
lease
transaction
for
personal,
family
or
household
purposes.
In
some
states
certain
agricultural
leases
may
be
considered
consumer
leases.
Contingent
Liabilities:
Liabilities
which
are
difficult
to
quantify,
or
which
may
or
may
not
come
to
pass,
such
as
outstanding
lawsuits.
Cost
of
Capital:
The
weighted-average
cost
of
funds
that
a
firm
secures
from
both
debt
and
equity
sources
in
order
to
fund
its
assets.
The
use
of
a
firm's
cost
of
capital
is
essential
in
making
accurate
capital
budgeting
and
project
investment
decisions.
Cost
Of
Goods
Sold:
The
total
cost
of
purchasing
raw
materials
and
manufacturing
finished
goods.
Equal
to
the
beginning
inventory
plus
the
cost
of
goods
purchased
during
some
period
minus
the
ending
inventory.
Coterminous:
Two
or
more
leases
that
are
related
so
that
both
will
terminate
at
the
same
date.
Current
Assets:
Value
of
cash
and
cash
equivalents,
accounts
receivable,
inventory,
marketable
securities,
prepaid
expenses,
and
other
assets
that
could
be
converted
to
cash
in
less
than
one
year.
Current
Liabilities:
The
sum
of
all
salaries,
interest,
accounts
payable
and
other
debts
due
within
one
year.
-
D
-
Depreciation:
A
tax
deduction
representing
a
reasonable
allowance
for
exhaustion,
wear
and
tear,
and
obsolescence,
that
is
taken
by
the
owner
of
the
equipment
and
by
which
the
cost
of
the
equipment
is
allocated
over
time.
Depreciation
decreases
the
company's
balance
sheet
assets
and
is
also
recorded
as
an
operating
expense
for
each
period.
Various
methods
of
depreciation
can
be
used
to
alter
the
number
of
periods
over
which
the
cost
is
allocated
and
the
amount
expensed
at
each
period.
Discount
Rate:
A
certain
interest
rate
that
is
used
to
bring
a
series
of
future
cash
flows
to
their
present
value
in
order
to
state
them
in
current,
or
today’s
dollars.
The
Federal
Funds
rate
is
very
common.
-
E
-
Early
Termination:
The
termination
of
a
lease
before
the
end
of
its
original
term.
Depending
on
the
lease
structure,
an
Early
Termination
may
have
consequences
such
as
a
final
payoff
consisting
of
the
sum
of
the
remaining
payments
discounted
at
a
nominal
rate
and
a
penalty.
Economic
Life
of
Leased
Property:
The
estimated
period
of
time,
with
normal
repairs
and
maintenance,
that
equipment
is
expected
to
be
economically
usable
for
the
purpose
for
which
it
was
intended
at
the
inception
of
the
lease.
End-of-Term
Options:
Options
stated
in
the
lease
agreement
that
give
the
lessee
flexibility
in
its
treatment
of
the
leased
equipment
at
the
end
of
the
lease
term.
Common
options
include
purchasing
the
equipment,
renewing
the
lease
or
returning
the
equipment
to
the
lessor.
Options
are
sometimes
given
as
an
amendment
to
the
lease
documents
and
are
not
made
part
of
the
actual
lease
document.
Equipment
Schedule/Lease
Schedule:
A
document
incorporated
by
reference
into
a
lease
agreement,
which
describes
in
detail
the
equipment
being
leased.
The
schedule
may
state
the
lease
term,
commencement
date,
repayment
schedule
and
location
of
the
equipment.
Equity:
An
ownership
interest
in
property
or
a
business.
Exemption
Certificate:
A
document
that
certifies
a
party
to
a
transaction
is
exempted
from
sales
or
use
tax
liability
under
certain
governmental
specified
circumstances.
-
F
-
FASB
13:
Statement
of
Financial
Accounting
Standards
No.
13
issued
by
the
Financial
Accounting
Standards
Boards.
This
statement
sets
forth
the
generally
accepted
accounting
procedures
for
lessor
and
lessee
accounting
and
financial
statement
reporting.
Fair
Market
Value:
The
value
of
a
piece
of
equipment
if
the
equipment
were
to
be
sold
in
a
transaction
determined
at
arm’s
length,
between
a
willing
buyer
and
a
willing
seller,
for
equivalent
property
and
under
similar
terms
and
conditions
Simply,
the
actual
market
value
of
the
leased
asset
at
the
time
the
lease
term
is
ended.
Fair
Market
Value
Renewal:
A
lease
that
includes
an
option
for
the
lessee
to
renew
the
lease
with
the
equipment
value
at
its
fair
market
value
at
the
end
of
the
lease
term.
Finance
Lease:
1).
As
most
frequently
used,
a
net
lease
which
has
as
its
purpose
the
financing
of
the
use
of
property
for
a
major
portion
of
the
property’s
useful
life.
The
term
is
typically
used
in
reference
to
leases
written
by
third-party
lessors
(see
third-party
lessors).
2).
General
term
applied
to
most
types
of
equipment
leases.
Typically,
a
finance
lease
is
a
full-payout,
non-cancelable
agreement,
and
the
lessee
is
responsible
for
maintenance,
taxes,
and
insurance.
Fixed
Purchase
Option:
An
option
given
to
the
lessee
to
purchase
the
leased
equipment
from
the
leasing
company
on
the
option
date
for
a
guaranteed
price.
Both
the
date
and
the
price
must
be
determined
at
the
inception
of
the
lease.
A
typical
fixed
purchase
option
is
10%
of
the
original
cost
of
the
equipment.
Full-Payout
Lease:
A
lease
in
which
the
lessor
recovers,
through
the
lease
payments,
all
costs
incurred
in
the
lease
plus
an
acceptable
rate
of
return,
without
any
reliance
upon
the
leased
equipment’s
future
residual
value.
Full-Service
Lease:
A
lease
that
includes
many
additional
services
such
as
maintenance,
insurance
and
property
taxes
that
are
paid
by
the
lessor,
the
cost
of
which
is
built
into
the
lease
payments.
-
G
-
Gross
Lease:
A
lease
in
which
the
lessor
is
liable
for
insurance,
property
taxes,
maintenance
expenses,
and
the
like;
aka,
operating
lease;
service
lease;
maintenance
lease.
(Compare:
net
lease).
Gross
Profit:
Pre-tax
net
sales
(gross
sales
minus
returns,
discounts,
and
allowances)
minus
cost
of
goods
sold.
Guarantor:
One
who
is
obligated
on
a
guaranty
agreement.
A
guarantor
may
be
another
company
and/or
an
individual.
Guaranty:
An
agreement
to
answer
for
the
debt
or
obligation
of
another
if
that
other
party
fails
to
pay
or
perform.
-
I
-
Incremental
Borrowing
Rate:
The
rate
that,
at
the
inception
of
the
lease,
the
lessee
would
have
incurred
if
it
had
borrowed
funds
over
a
similar
term
to
purchase
the
leased
asset.
Insurance
Interest:
An
interest
capable
of
being
protected
by
a
policy
of
insurance.
Investment
Tax
Credit
(ITC):
A
credit
against
taxes
otherwise
due
from
a
taxpayer
under
the
Internal
Revenue
Code.
The
credit
is
generally
computed
as
a
percentage
of
the
costs
of
certain
types
of
assets.
It
is
currently
not
a
part
of
the
IRS
Code.
-
L
-
Landlord
Waiver:
A
document
in
which
a
landlord
acknowledges
that
certain
property
on
its
tenant’s
premises
is
owned
by
a
third
party
(the
lessor)
and
is
leased
to
the
tenant
and
in
which
a
landlord
agrees
to
recognize
and
not
interfere
with
the
lessor’s
rights
respecting
the
lessor’s
property.
Lease:
A
transaction
in
which
use
and
possession
but
not
title
to
tangible
personal
property
is
transferred
for
a
consideration.
Lease
Agreement:
The
contractual
agreement
between
the
lessor
and
the
lessee
that
sets
forth
all
the
terms
and
conditions
of
the
lease.
Lease
Line:
A
pre-approved
amount
of
leasing
allowed
a
lessee
by
a
lessor.
United
Financial
Services
commonly
approves
lessees
for
lines
of
credit.
Lease
Payment:
The
periodic
payment
made
during
the
lease
term.
Such
payments
are
usually
of
an
even
amount
but
it
is
not
uncommon
for
a
lease
to
have
“gaps”
in
the
payment
amount,
or
to
be
otherwise
contoured
to
fit,
for
example,
the
seasonal
fluctuations
of
a
lessee’s
income.
(Generally,
leasing
may
provide
for
more
creativity
in
this
regard
than
a
loan.)
Loss
Payee:
A
party
entitled
to
receive
proceeds
from
an
insurance
settlement
arising
in
connection
with
a
covered
casualty
or
loss.
Lease
Purchase:
Full
payout,
net
leases
structured
with
a
term
equal
to
the
equipment's
estimated
useful
life.
As
Lease
Purchases
include
a
bargain
purchase
option
for
the
lessee
to
purchase
the
equipment
for
one
dollar
at
the
expiration
of
the
lease,
these
leases
are
often
referred
to
as
"dollar
buyout"
or
"buck-out"
leases.
Lease
Purchases
are
considered
to
be
Capital
Leases.
Lease
Term:
Length
of
a
lease,
usually
stated
in
monthly
increments
but
occasionally
stated
in
quarterly
or
yearly
increments.
Leveraged
Lease:
A
lease
wherein
the
stream
of
payments
have
a
debt
participant.
The
ownership
of
the
leased
equipment
remains
with
the
leasing
company.
Leveraged
Leases
can
be
either
recourse
or
non-recourse
leases.
Lien:
A
security
interest
or
an
encumbrance
upon
property.
Long
Term
Debt:
Loans
and
obligations
with
a
maturity
of
longer
than
one
year;
usually
accompanied
by
interest
payments.
-
M
-
Master
Lease:
A
continuing
lease
arrangement
whereby
additional
equipment
can
be
added
from
time
to
time
merely
by
describing
that
equipment
in
a
new
lease
schedule
executed
by
the
parties.
The
original
lease
contract
terms
and
conditions
apply
to
all
subsequent
schedules.
Minimum
Lease
Payments:
From
the
lessee
perspective,
all
lease
payments
that
are
required
to
be
made,
may
be
required
to
be
made
or,
in
all
probability,
will
be
made
to
the
lessor
per
the
lease
agreement.
Minimum
lease
payments
for
the
lessee
include,
but
are
not
limited
to,
the
lease
payments
(excluding
executory
costs)
during
the
non-cancelable
lease
term,
bargain
purchase
options,
and
any
put
options,
the
amount
of
any
lessee
residual
guarantees
and
nonrenewal
penalities
that
are
insufficiently
severe
to
cause
renewal.
Minimum
lease
payments
for
the
lessor
include
all
payments
to
be
received
from
the
lessee,
as
described
above,
as
well
as
the
amount
of
any
residual
guarantees
by
unrelated
third-party
guarantors.
Modified
Accelerated
Cost
Recovery
System
(MACRS):
The
current
tax
depreciation
system
as
introduced
by
the
Tax
Reform
Act
of
1986,
Generally
effective
for
all
equipment
placed
in
service
after
December
31,
1986.
Municipal
Lease:
A
lease
designed
to
meet
the
special
needs
of
state
and/or
local
governments.
These
leases
contain
a
"non-appropriation"
clause
stating
that
the
only
condition
under
which
the
lessee
may
be
released
from
its
payment
obligation
is
when
the
legislature
or
funding
authority
fails
to
appropriate
funds.
Since
the
lessee
is
a
municipality
or
an
organization
supporting
the
government,
it
is
exempt
from
paying
federal
income
taxes.
For
this
reason,
the
Internal
Revenue
Service
does
not
charge
the
leasing
company
income
taxes
on
leases
to
these
customers.
-
N
-
Net
Cash
From
Financing:
Cash
flows
generated
through
debt
and
equity
financing.
Net
Cash
From
Investing:
Cash
flows
associated
with
the
buying
and
selling
of
fixed
assets
and
business
interests.
Net
Cash
From
Operations:
The
sum
of
net
profit,
depreciation,
change
in
accruals,
and
change
in
accounts
payable,
minus
change
in
accounts
receivable,
minus
change
in
inventories.
Net
Income:
Gross
sales
(revenue)
minus
cost
of
goods
sold,
SG&A,
taxes,
interest,
depreciation,
and
other
expenses.
Net
Lease:
A
lease
in
which
all
costs
in
connection
with
the
use
of
equipment,
such
as
maintenance,
insurance
and
property
taxes,
are
paid
for
separately
by
the
lessee
and
are
not
included
in
the
lease
rental
paid
to
the
lessor
Net
Present
Value/Present
Value:
The
discounted
value
of
a
payment
or
stream
of
payments
to
be
received
in
the
future,
taking
into
consideration
a
specific
interest
or
discount
rate.
Present
Value
represents
a
series
of
future
cash
flows
expressed
in
today's
dollars.
Net
Worth:
Total
assets
minus
total
liabilities
of
an
individual
or
company.
For
a
company,
also
called
owner's
equity
or
shareholders'
equity
or
net
assets.
Non-recourse
Loan:
In
a
leveraged
lease,
the
lenders
cannot
look
to
the
leasing
company
that
sold
them
the
lease
for
repayment
if
the
lessee
fails
to
meet
its
payment
obligations.
The
lender's
only
recourse
is
to
the
lessee
and,
therefore,
the
lessee's
credit
rating
is
of
prime
importance.
-
O
-
Off
Balance
Sheet
Financing:
A
lease
that
qualifies
as
an
Operating
Lease
for
the
lessee's
financial
accounting
purposes.
Such
leases
are
referred
to
as
"off-balance
sheet
financing"
due
to
their
exclusion
from
the
balance
sheet
asset
and
debt
presentation,
except
for
that
portion
of
the
payments
that
is
due
in
the
current
fiscal
period.
Full
disclosure
of
such
transactions
is
typically
made
in
the
auditor's
notes
to
the
financial
statements.
Periodic
payments
are
recorded
as
expense
items
on
the
lessee's
income
statement.
Operating
Lease:
A
lease
that
is
treated
as
a
true
lease
for
book
accounting
purposes.
An
operating
lease
must
have
all
of
the
following
characteristics:
1)
the
lease
term
is
less
that
75%
of
estimated
economic
life
of
the
equipment;
2)
the
present
value
of
the
lease
payments
is
less
than
90%
of
the
equipment's
fair
market
value;
3)
the
lease
cannot
contain
a
bargain
purchase
option;
4)
ownership
is
retained
by
the
leasing
company
during
and
after
the
lease
term.
The
lessee
accounts
for
an
operating
lease
without
showing
the
equipment
as
an
asset
or
the
lease
payment
obligations
as
a
liability).
For
more
detailed
information,
please
consult
paragraph
7
of
FASB
13.
Owner's
Equity:
The
residual
interest
in
the
assets
of
an
entity
that
remains
after
deducting
it's
liabilities.
-
P
-
Personal
Property
Tax:
A
tax
on
the
ownership
of
personal
property.
This
tax
is
usually
charged
by
a
state
or
borough/county/parish
annually
for
the
assets
leased
for
the
prior
year.
Purchase
Option:
An
option
in
the
lease
agreement
that
allows
the
lessee
to
purchase
the
leased
equipment
at
the
end
of
the
lease
term
of
the
lease
for
either
a
fixed
amount
or
at
the
future
fair
market
value
of
the
leased
equipment.
Purchase
Order:
An
offer
for
the
purchase
of
an
item
of
property.
The
purchase
order
will
normally
specify
the
terms
and
conditions
under
which
the
buyer
is
willing
to
make
the
purchase;
when
accepted
by
the
seller
it
becomes
the
purchase
contract.
Put:
The
requirement
to
purchase
equipment
at
a
particular
time
and
at
a
predetermined
amount.
In
a
lease
transaction,
this
is
a
leasing
company's
right
to
force
the
lessee
to
purchase
the
equipment
at
the
end
of
the
lease
term
for
that
predetermined
amount.
A
lease
agreement
containing
a
Put
is
a
Capital
lease
and
not
an
Operating
lease.
-
R
-
Renewal
Option:
An
option
in
the
lease
agreement
that
allows
the
lessee
to
extend
the
lease
term
for
an
additional
period
of
time
beyond
the
expiration
of
the
initial
lease
term,
in
exchange
for
lease
renewal
options.
Residual
The
value
of
the
lease
property
at
the
end
of
the
lease
term
as
estimated
at
the
time
the
lease
is
executed;
term
value.
Although
the
terms
“residual
value”
or
“term
value”
are
sometimes
used
in
reference
to
the
actual
value
of
the
property
at
the
conclusion
of
the
term,
the
term
“realized
value”
is
the
more
commonly
used
and
more
appropriate
term
for
the
actual
value
of
the
property
at
the
conclusion
of
the
lease
term.
Residual
Value:
The
value,
either
actual
or
expected,
of
leased
equipment
at
the
end,
or
termination,
of
the
lease.
Retained
Earnings:
Accounting
earnings
that
are
retained
by
the
firm
for
reinvestment
in
its
operations;
earnings
that
are
not
paid
out
as
dividends
but
instead
reinvested
in
the
core
business
or
used
to
pay
off
debt.
Revenue:
Total
dollar
amount
collected
for
goods
and
services
provided.
Also
called
gross
sales.
Reviewed
Financial
Statements:
Financial
statements
accompanied
by
an
accountant's
expression
of
limited
assurance.
The
accountant
communicates
this
limited
assurance
in
a
report
by
stating
that
he
or
she
is
not
aware
of
any
material
modifications
that
should
be
made
to
the
financial
statements
in
order
for
them
to
be
in
conformity
with
Generally
Accepted
Accounting
Principles.
The
accountant
must
perform
sufficient
inquiry
and
procedures
to
give
a
reasonable
basis
for
that
conclusion,
but
doesn't
have
to
independently
verify
the
accuracy
of
the
data
as
long
as
it
looks
reasonable.
Rule
of
78:
An
accelerated
method
of
allocating
periodic
earnings
in
a
(Lease
or
a
Loan)
based
upon
the
sum-
of-
the-
years
method.
-
S
-
Sale
Leaseback:
A
transaction
where
the
owner
sells
the
equipment
it
already
owns
to
a
leasing
company
which
then
leases
it
back
to
the
same
original
owner
who
now
becomes
the
lessee
in
the
transaction.
This
structure
is
often
used
to
raise
cash
or
to
take
the
transaction
off
balance
sheet.
Security
Deposit:
A
specific
amount
paid
at
the
inception
of
the
lease
by
the
lessee
to
insure
full
compliance
with
the
lease
and
to
provide
the
lessor
with
some
protection
against
faults,
delays,
or
other
failures
of
performance
by
the
lessee.
Occasionally,
advance
periodic
lease
payments
may
serve
the
purpose
of
a
security
deposit,
but
more
frequently,
the
security
deposit
is
a
separately
identified
obligation.
Service
Lease:
A
lease
in
which
the
lessor
provided
complete
service,
maintenance,
and
care
for
the
leased
equipment;
maintenance
lease;
operating
lease;
gross
lease.
Shareholders'
Equity:
Total
assets
minus
total
liabilities;
a
company's
net
worth
is
the
same
thing.
Short
Term
Debt:
Debt
obligations,
recorded
as
current
liabilities,
requiring
payment
within
the
year;
often
used
to
refer
to
the
current
portion
of
bonds
or
loans.
Soft
Cost:
Defined
as
any
cost
above
the
equipment
cost.
Examples
of
this
could
be
software,
shipping,
installation,
hardware,
warranty,
and
labor.
-
T
-
Tangible
Assets:
Economic
resources
with
future
benefit
that
are
used
in
the
normal
operating
activity
of
the
organization
that
can
be
physically
observed,
e.g.,
land,
buildings,
and
equipment.
Terminal
Rental
Adjustment
Clause
(TRAC):
A
special
type
of
lease
where
the
lessee
guarantees
the
residual
value
to
the
leasing
company
and
the
lease
is
treated
as
a
true
lease
for
tax
purposes.
TRAC
leases
can
only
be
used
for
motor
vehicles,
such
as
trucks
or
trailers.
Total
Assets:
All
items
of
economic
value
owned
by
an
individual
or
corporation,
especially
that
which
could
be
converted
to
cash,
including,
but
not
limited
to,
cash,
securities,
accounts
receivable,
inventory,
equipment,
buildings,
vehicles,
and
other
properties.
On
a
balance
sheet,
assets
are
equal
to
the
sum
of
liabilities,
common
stock,
preferred
stock,
and
retained
earnings.
Total
Liabilities:
All
financial
obligations,
debts,
claims,
or
potential
losses.
True
Lease:
Also
known
as
an
operating
lease,
where
the
leasing
company
qualifies
for
the
tax
benefits
of
ownership
and
the
lessee
is
allowed
to
claim
the
entire
amount
of
the
lease
rental
as
a
tax
deduction.
-
U
-
Uniform
Commercial
Code
(UCC)
Financing
Statement:
A
document,
under
the
UCC,
filed
with
a
county
(and
sometimes
the
Secretary
of
State)
to
provide
public
notice
of
a
security
interest
in
personal
property.
Useful
Life:
The
period
of
time
during
which
an
asset
will
have
economic
value
and
be
usable.
The
useful
life
of
an
asset
is
sometimes
called
the
economic
life
of
the
asset.
-
V
-
Vendor:
A
purveyor
of
equipment
from
whom
a
lessor
purchases
equipment
at
the
specific
request
of
a
lessee
for
a
lease
to
that
lessee;
a
supplier. |
