source: https://study.

com/academy/lesson/intermediate-financial-accounting-concepts-
terminology.html

Leases

Alyssa starts by analyzing leases. A lease is an agreement between two or more

parties that identify the rights, obligations and time frame of the agreement. She
interviews XYZ's accountant in charge of leasing and asks him to discuss the
benefits and any challenges.

The accountant notes that leasing provides minimal initial cash outlay,
maintenance is typically included in the contract, and lease payments can be
deducted as an expense for tax purposes on the income statement.

He then explains that a major drawback. XYZ has a one million dollar piece of
leased equipment, the contract ends next month and after a lengthy term, and
they will not own the equipment. Additionally, he's working on an analysis that
may show that buying the equipment would have been cheaper.

Alyssa thanks him for his perspective and begins reviewing their leasing contracts
and transactions. Afterwards, she meets with another accountant to discuss
intangible assets.