Sales-type lease

A type of finance lease where the present value of lease payments is recognised by the lessor as revenue right at the inception of the lease.

The lease asset which was initially on the lessor’s balance sheet at its carrying value is removed, and this amount is recorded as COGS in the lessor’s income statement.

Just as with a normal sales transaction, the difference between the sales price and cost of goods sold is the gross profit.

Compare: Direct financing lease

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