(Comparison with operating lease)
A finance lease differs from an operating
lease in that:
—in a finance lease the lessee has
ultimate ownership of the asset.
In an operating lease the lessee only uses the
asset for the duration of the asset.
—in a finance lease the lessor will recover all or most of the cost of the
equipment from the rentals paid by the lessee.
In an operating lease the lessor will have a
substantial investment or residual value on completion of the lease.
—in a finance lease the lessee has
the benefits and risks of economic ownership of the asset (e.g. risk of
obsolescence, selling or scrapping the asset).
In an operating lease the lessor has the benefits
and risks of owning the asset.