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The Economics of and Accounting for Lease Transactions

In: Encyclopedia of Finance

Author

Listed:
  • Cheng-Few Lee

    (Rutgers University)

  • Ryan McDonough

    (Rutgers University)

Abstract

This chapter explores a company’s decision to enter into a lease contract to finance capital investments. We discuss the motivations behind the lease-versus-buy tradeoff in terms of both the economics of and accounting for lease financing arrangements. Throughout our discussion, we reference academic research related to the lease-versus-buy decision, the factors influencing the extent of leasing activity, the economic consequences of lease financing, and the role of lease-related accounting standards. We also provide a detailed review of the provisions in the current lease accounting standards that were recently issued by the Financial Accounting Standards Board and the International Accounting Standards Board.

Suggested Citation

  • Cheng-Few Lee & Ryan McDonough, 2022. "The Economics of and Accounting for Lease Transactions," Springer Books, in: Cheng-Few Lee & Alice C. Lee (ed.), Encyclopedia of Finance, edition 0, chapter 86, pages 2019-2040, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-91231-4_88
    DOI: 10.1007/978-3-030-91231-4_88
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    More about this item

    Keywords

    ASC 842; IFRS 16; Investment; Finance leases; Lease financing; Lease-versus-buy; Operating leases;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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