Leasing as a process and financial arrangement began as early as 2010 BC but modern leasing has started around 1950s, which first came with the creation of Investment Tax Credit in 1962 that spurred leasing that’s tax based. Following the strides of the early leases, a lot of equipment and other products sprouted to meet the growing demand of consumers. Many leasing companies got into leasing nontax products like vendor programs, limited partnerships, residual sharings, operating leases, and income funds.
Besides the aforementioned reasons for the meteoric rise of leasing, a lot of factors can be looked on as the force behind it. It has achieved its prestige and popularity in the recent twenty years due to the following factors:
Banking industry entered into the leasing realm, giving it more credibility from being the last alternative to any financial arrangement.
A new form, FASB 13, was produced by the accounting sector that would help in standardizing lease reporting in financial statements.
Rev Ruling 55-540 and Rev Proc 75-21, Internal Revenue Service issued guidelines, are implemented to help lessees and lessors to put a structure in leasing transactions.
People have been wondering why businesses have learned to trust leasing as a financial arrangement all through the passing years, when the economic terrain has been quite unreliable. The businesses have this to say for the reason:
In leasing there is relatively lower monthly payments and at times with lesser or no down payment involved.
Most companies have gained the mentality that at times owning an equipment is not a practical choice, that they don’t have to own the equipment to be able to use it. They have seen the economics in leasing more than loans.
The depreciation and interest on debts produce tax benefits for companies.
Some lessees can get off the record considerations and financial adjustments.
Leasing is controlled and guided by the Financial Accounting Standards Board (FASB), and the Internal Revenue Service (IRS) and the Uniform Commercial Code (UCC), which are trustworthy and notable institutions.
Source: http://www.executivecaliber.ws
