Understatement of Lessee Asset
Since the leased asset does not form part of the lessor assets, there is a effective understatement of his assets, which may sometimes lead to gross underestimation of the lessee. However, there is now an accounting practice to disclose the leased assets by way of a footnote to the balance sheet.
Double Sales Tax
With the amendment of the sales tax law of various States, a lease financing transaction may be charged sales tax twice once when the lessor purchases the equipment and again when it is leased to the lessee.