Synthetic Lease

AAA

DEFINITION of 'Synthetic Lease'

An operating lease that is structured in a way so that it is not recorded as a liability on the balance sheet. Instead, it is considered to be an expense on the income statement.

INVESTOPEDIA EXPLAINS 'Synthetic Lease'

Basically, a synthetic lease allows a company to control real estate without being required to show the real estate as an asset on the financial statements

RELATED TERMS
  1. Lease

    A legal document outlining the terms under which one party agrees ...
  2. Operating Lease

    A contract that allows for the use of an asset, but does not ...
  3. Graduated Lease

    A type of long-term, typically for commercial property, lease ...
  4. Leaseback

    An arrangement where the seller of an asset leases back the same ...
  5. Convention Statement

    A document filed by an insurance or reinsurance company that ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative ...
RELATED FAQS
  1. How do businesses determine if an asset may be impaired?

    In the United States, assets are considered impaired when net carrying value (book value) exceeds expected future cash flows. ... Read Full Answer >>
  2. Why is work in progress (WIP) considered a current asset in accounting?

    Accountants consider work in progress (WIP) to be a current asset because it is a type of inventory asset. Accountants consider ... Read Full Answer >>
  3. What are some ways a company can improve on its Return on Capital Employed (ROCE)?

    Options available to a company seeking to improve on its return on capital employed (ROCE) ratio include reducing costs, ... Read Full Answer >>
  4. How can you use a cash flow statement to make a budget?

    To use the cash flow statement to make a budget, a company needs to combine the operating cash flow portion of its cash flow ... Read Full Answer >>
  5. How is market to market accounting different than historical cost accounting?

    Historical cost accounting and mark-to-market, or fair value, accounting are two methods used to record the price or value ... Read Full Answer >>
  6. Do stock splits and stock dividends affect stockholder equity?

    Stockholders' equity represents the capital portion of a company's balance sheet. The stockholders' equity can be calculated ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  2. Home & Auto

    New Wheels: Lease Or Buy?

    These two major ways to obtain a car have very different advantages and drawbacks. Find out which is best for you.
  3. Bonds & Fixed Income

    Uncovering Hidden Debt

    Understand how financing through operating leases, synthetic leases, and securitizations affects companies' image of performance.
  4. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  5. Economics

    Explaining the EBITDA Margin

    EBITDA margin can provide an investor with a cleaner view of a company's core profitability.
  6. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  7. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  8. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  9. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  10. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center