John Beans
Member
This inspired me to learn about the accounting for certain types of leases where you do NOT allow purchase after lease. Those who already know should skip over this post. I'm not an accountant, I just play one on TV.
Check out PWC's guide to lease accounting here, and check out page 4-20 where they give an example of such a lease (see the assumptions at the top of the page). They give an example for purchasing a printer (so the numbers are smaller), but the result is this:
Cash-wise not so great, because you have 100% of the COGS upfront, a small upfront payment, and a stream of inflows for three years, and at the end the company owns a depreciated car.
Check out PWC's guide to lease accounting here, and check out page 4-20 where they give an example of such a lease (see the assumptions at the top of the page). They give an example for purchasing a printer (so the numbers are smaller), but the result is this:
- Revenue booked at sale is the initial lease payment plus the prevent value of the planned lease payments
- COGS booked is the normal COGS minus the present value of the residual
Cash-wise not so great, because you have 100% of the COGS upfront, a small upfront payment, and a stream of inflows for three years, and at the end the company owns a depreciated car.