Net Lease Equipment

Financial Lease. Financial leasing is a contract involving payment over a longer period. Operating Lease. Leveraged and non-leveraged leases. Conveyance type lease. Sale and leaseback. Full and non pay-out lease. Specialized service lease. Net and non-net lease.

A net lease is a type of lease where the tenant pays a portion or all of the taxes, insurance fees, and maintenance costs for a property, in addition to base rent. Net leases are commonly used in commercial real estate.

The Gross Lease. The gross lease tends to favor the tenant. The Net Lease. The net lease, however, tends to favor the landlord. The Modified Gross Lease.

The term net lease refers to a contractual agreement where a lessee pays a portion or all of the taxes, insurance fees, and maintenance costs for a property in addition to rent.A net lease is the opposite of a gross lease, where the tenant pays a flat rental fee while the landlord is responsible for the other costs.

A lessee must capitalize a leased asset if the lease contract entered into satisfies at least one of the four criteria published by the Financial Accounting Standards Board (FASB). An asset should be capitalized if:The lease runs for 75% or more of the asset's useful life.

Assets being leased are not recorded on the company's balance sheet; they are expensed on the income statement. So, they affect both operating and net income.

Unlike an outright purchase or equipment secured through a standard loan, equipment under an operating lease cannot be listed as capital. It's accounted for as a rental expense. This provides two specific financial advantages: Equipment is not recorded as an asset or liability.

The equipment account is debited by the present value of the minimum lease payments and the lease liability account is the difference between the value of the equipment and cash paid at the beginning of the year. Depreciation expense must be recorded for the equipment that is leased.