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.

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