University School of Business

BBA
Bachelor of Business Administration
Financial Services and Markets-BAT 354

Ms. Amandeep Kaur Sekhon

Financial Services DISCOVER . LEARN . EMPOWER

Course Outcome
CO Title Level
Number

CO2 Understand
To illustrate the current structure and regulation of the
Indian financial services sector
CO3 Analyse
To compare the role played by various financial
institutions in Indian Economy.

2
 LEASING- MEANING
Leasing
• Leasing is a contractual arrangement where one party (the lessor)
allows another party (the lessee) to use an asset for a specific period
in exchange for periodic payments, called lease rentals.
• Lessor: The owner of the asset.
• Lessee: The party that uses the asset by paying lease rentals.
• Leasing is often used as a financing tool, especially for high-cost assets
like machinery, vehicles, or real estate.
 TYPES OF LEASING
Types of Leasing
1.Operating Lease:
 Short-term lease, typically for a period shorter than the asset's useful life.
 Ownership of the asset remains with the lessor, and the lessor bears the risk of
obsolescence or depreciation.
 Lease payments are treated as an expense for the lessee.
 Examples: Renting office equipment or vehicles.
2. Finance Lease (also called Capital Lease)
 Long-term lease, often lasting for most of the asset's useful life.
 Lessee assumes most risks and rewards of ownership, though ownership may not
transfer formally.
 At the end of the lease term, there may be an option to purchase the asset at a nominal
price. 4
 TYPES OF LEASING
3. Sale and Leaseback:
 The owner of the asset sells it to a lessor and then leases it back.
 This allows businesses to free up capital while continuing to use the asset.
4. Leveraged Lease:
 The lessor finances the purchase of the asset using both equity and debt.
 Used for high-value transactions like aircraft leasing.

5
 ACCOUNTING TREATMENT OF
LEASING
A. From the Lessee’s Perspective
I. Operating Lease:
• Lease payments are treated as an expense in the income statement.
• No asset or liability is recognized on the balance sheet.
II. Finance Lease:
• Asset is recognized as a right-of-use asset, and a corresponding liability is recorded for future lease payments.
• Depreciation on the asset and interest expense on the lease liability are recorded in the income statement.
B. From the Lessor’s Perspective
III. Operating Lease:
• The leased asset remains on the lessor’s balance sheet.
• Lease rentals are recognized as income in the income statement.
IV. Finance Lease:
• The asset is derecognized from the lessor’s balance sheet, and a lease receivable is recorded instead.
• The interest component of lease payments is recognized as income over time.

6
 ACCOUNTING STANDARDS
GOVERNING LEASING
1. IFRS 16:
a. Introduced a single accounting model for lessees, requiring most
leases to be treated as finance leases.
b. Exemptions are provided for short-term leases and low-value assets.
2. ASC 842 (US GAAP):
a. Similar to IFRS 16 but includes minor differences in lease
classification and measurement.
3. IND AS 116 (Indian Accounting Standards):
a. Mirrors IFRS 16, with specific local adaptations.
7
 APPLICATIONS
• Depository institutions – deposit-taking institutions that accept and
manage deposits and make loans, including banks, building
societies, credit unions, trust companies, and mortgage
loan companies;
• Contractual institutions – insurance companies and pension funds
• Investment institutions – investment banks, underwriters, brokerage
firms

8
ASSESSMENT PATTERN

9
 REFERENCES
1. M.Y. Khan, Financial Services, Tata McGraw-Hill Publishing Co. Ltd., New Delhi, 4th
Edition, 2006.

2. L. M. Bhole, Financial Institutions and Markets, Tata McGraw-Hill Publishing Co.

3. V. K. Bhalla: Management of Financial Services, Anmol Publications.

4. https://www.accruent.com/resources/blog-posts/lease-accounting-overview

5. https://corporatefinanceinstitute.com/resources/accounting/lease-accounting/

6. https://trullion.com/blog/lessor-vs-lessee-differences-and-accounting-treatment/
10
 THANK YOU

For queries
Email: [email protected]