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Jan31
Off balance sheet comments
A recent comment concerning off balance sheet financing generated several additional questions and thoughts that I would like to share with you. The basic issue was why banks put leverage ration restrictions on companies that prevent them from entering into loans or capital leases for equipment, but then allow them to enter into operating leases.
 
It is common knowledge that banks and rating agencies, among others, restate the lessees' financial statements to take the operating leases into account. In this regard, they are monitoring the indebtedness associated with the operating lease. What never gets into this analysis is the residual portion of the lease, meaning that the residual portion of the equipment acquisition is always off balance sheet. Many internal compensation plans do not consider operating leases, which adds impetus to use operating leases as a financing technique.
 
But what about those residuals? It seems that banks are ignoring them, some of which can be material in amount, depending on the technology, term, and structure of the lease. Is this an example of the banking industry giving its customers room to acquire needed equipment or is it an oversight? I think there are several issues going on here.
Continue Reading
Jan30
Higher foreign tax credits
The IRS has issued final regulations affecting foreign tax credits, which will alter the lease versus buy equation for those lessees with expiring foreign tax credits. Continue Reading
Jan25
More Dumbing
The nature and make-up of learners certainly has changed. This change is reflected in the modality of the learning, and the expectations and attitudes of the students. Continue Reading
Jan23
Off Balance Sheet Financing
Off balance sheet leasing is a popular financing technique because of its financial reporting advantages. FASB Statement No. 13 has rules that govern how leases are classified. Continue Reading
Jan19
What a Schwing!
I was at a client location, where I saw the coolest thing – one of the sales guys had a metal scale model of a 55 meter Schwing!  What other equipment gets mentioned in the movies and on late night TV? Continue Reading
Jan18
Dumbing Down
It seems that people took their training more seriously back in the day.  Are we seeing a dumbing-down of the leasing industry? Continue Reading
Jan13
The Rule of Law is Alive and Well
Reasons for being in government in some countries include jobs for family members, bribes, and kickbacks.  It is encouraging that the rule of law functioned in Ghana, where a government official was unable to abuse his position to defraud a leasing company of what was rightfully theirs. Continue Reading
Jan12
Fraud Strikes Again
Leasing fraud is not limited just to small, unsuspecting lessors. Even the biggest and the best are taken advantage of at some point. It is critical, therefore, that everyone in the company is constantly vigilant and alert to the risks of fraud. Continue Reading
Jan11
What - No Massage Parlors?
The recently enacted Gulf Opportunity Zone Act of 2005 contains a package of tax incentives designed to help revitalize the areas hit by hurricanes Katrina, Rita, and Wilma. These provisions relating to additional first-year depreciation, increased expensing, and the carryback of NOLs don't apply to any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any liquor stores. Continue Reading
Jan 9
Sale-leaseback Fundamentals
In the airline industry, a sale-leaseback creates liquidity and also introduces operational flexibility, particularly if a short term leaseback is arranged. This leasing product becomes very attractive for these cash-strapped and credit-challenged companies.  In its most basic form, a sale-leaseback occurs when an owner of equipment sells it to a lessor, and then immediately leases it back from that lessor.  Continue Reading
Jan 6
Deferred Again

Okay, today’s leasing headlines have really got me going (again).  This time the cause is the latest misrepresentations by the press of legitimate, and quite legal, leasing transactions. This particular aggravation involves Arnold Schwarzenegger's investment in a sale-leaseback of a 747 with Singapore Airlines and, horror of horrors, his deferral of taxes.

Continue Reading
Jan 4
A Level Pitch
The equipment leasing industry in the US has endured ongoing attacks from the tax authorities, and it now looks like the UK leasing industry may find itself in similar circumstances. One of the provisions of the proposed budget gives the right to claim the capital allowances on leased equipment to the lessee, instead of the lessor.  Continue Reading
Jan 2
What is tax-exempt leasing?
While most leases are written with commercial entities, the tax-exempt world also utilizes leasing to finance its equipment needs. We generally refer to tax-exempts as those entities that are not subject to income tax. These entities include the federal government, states, cities, counties, hospitals, universities, port authorities, health authorities, charitable organizations, and churches, to name a few. Continue Reading

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