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大家赶紧琢磨一下啊 每人翻一句也好的啊 不然要把我折磨死的这翻译Illusion in Lease Financing
From Harvard Business Review by Donald R .Gant
• Is lease financing a new approach or merely another form of borrowing?
• Are the advantages which lease financing appears to offer over ownership real or illusory?
• Can lease financing really make it possible for a company to have its cake and eat it, too?
Sings reading “Buy or Lease” are a familiar sight on vacant lots and buildings. But in recent years the choice expressed in these three words has become more than just the lure used by real-estate agents to attract prospective clients. It has become an issue of companies in almost every industry, with implications reaching to the highest levels of corporate financial policy. And as the controversy over the relative merits of the alternatives has mounted, billions of dollars have been wagered on both sides.
1. Rented Capital
In the pattern of external financing resulting from the unprecedented demands for capital imposed by postwar growth and expansion, at least two significant developments deserve attention One has been widely recognized: the decided tendency toward borrowed capital in preference to equity capital. Figures compiled by the Securities and Exchange Commission indicate that of the $33 billion raised by industrial corporations during the ten-year period from 1948 through 1957, more than three quarters of it took the form of debt financing. This is exclusive of loans, both short-term and long-term, made by commercial banks.
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The other development, which has attracted far less attention, has been the emergence during this period of another form of capital as a major source of corporate funds. This might be termed "rented capital" — assets financed by means of leases, Although there are no figures by which to gauge the importance of rented capital in comparison with the more traditional forms, lease financing is unquestionably the principal method of external financing being employed in some industries. Moreover, its use is rapidly being extended both to new industries and to new applications. While leasing has found its principal application to date in the financing of real estate, it is now possible to lease almost any type of capital asset a business may require, from office equipment to industrial machinery, ships, and airplanes.
The growth of lease financing has won it an enthusiastic band of supporters. They have pointed out the many advantages which it offers—advantages which make the alternative of ownership appear outmoded. Perhaps the principal argument raised in its behalf is that it permits a company to purchase the use of an asset as it is needed, in the same way that electric power and telephone service are purchased, and thus avoids the capital investment and responsibilities which ownership entails.
Unbounded enthusiasm for lease financing is not shared in all quarters, however. To an important segment of the financial community, lease financing, stripped of its illusions, is not a fresh new approach to the acquisition of fixed assets at all, but merely an old friend in disguise. It is seen as basically another form of debt financing, an extension of the preference for borrowed capital noted earlier. And from this viewpoint there are dangers in the growing trend toward lease financing to the extent that companies using it, and investors in their securities, fail to appreciate the implications of their mounting lease commitments merely because they are buried in a footnote rather than appearing as liabilities on the balance sheet.
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The financial lease is a very flexible document. It has to be in order to perform its essential functions in a wide variety of applications. Yet at least four basic features are common to every financial lease:
(1) It provides for a basic term during which the lease is noncancellable. The length of this basic lease period is determined primarily by the economic life of the asset, and is usually somewhat shorter than its expected life. Where the economic life of the asset is extremely long, the credit standing of the company may limit the length of this basic term.
(2) It provides for periodic rental payments during this period, which are calculated to return the original investment in the asset to the investor and to provide him with a predetermined rate of return. Occasionally, where the basic lease term is unusually short in relation to the asset's economic life or where land values represent a substantial portion of the investment, the amount repaid during the basic term of the lease may be something less than the original investment.
(3) The rental payment so determined may be increased to cover the costs of maintenance, taxes, insurance, and other expenses directly related to the property. Usually, however, the arrangement is on a "net lease" basis, with the company assuming the obligation for these expenses as well as continuing responsibility for the management of the property.
(4) The lease customarily provides some means by which the company may continue to use the asset after the expiration of the basic lease term. This may take the form of renewal options for additional periods, usually at rentals substantially reduced from those paid during the initial term. The company may also be given an option to purchase the asset at the end of the basic lease period, or sometimes even during it.
2. Main Attractions
Lease financing, then, is essentially a form of borrowing — perhaps borrowing an asset rather than the funds with which to purchase it, but resulting in obligations which are substantially the same as those incurred in borrowing money. When contrasted with ownership financed by long-term debt, however, lease financing suffers in two very significant respects:
(1) The investor normally demands a return on his investment during the basic lease period which is somewhat higher than the rate at which the company would be able to borrow on its direct debt obligation. This differential is usually in the range of 1/2 of 1 % to1 %, but may often be greater.
(2) The other disadvantage, which may prove far more significant, is that at the expiration of the basic lease period the company loses the remaining value of the property which it has paid for, or else must pay for it again or continue to pay rent for its use.
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One argument is that leasing offers certain tax advantages over ownership. Under present tax laws rental payments are considered an operating expense and may be deducted from taxable income. This gives rise to two basic differences in the tax effects of leasing as compared with ownership:
(1) Leasing makes it possible, in effect, to write off the depreciable portion of the property over the basic term of the lease, which is generally shorter than the period which would be permitted for depreciation. The result is not a tax saving but a shift in the timing of deductions and tax payments, similar to the effects of accelerated depreciation. To the extent that tax payments are deferred, the company benefits by having the use of these funds for the additional period.
(2) Leasing makes it possible, in effect, to write off land values against taxable income, which is not allowed for depreciation purposes. The effect can be very significant where land represents a substantial portion of the total investment, as in a downtown department store property. But while leasing provides a way of recovering part of the investment in land during the basic period of the lease. And if past trends in the value of land are any indication of the future, the loss could be considerably greater.
Leasing makes it possible to finance capital additions on a piecemeal basis. For practical considerations, long-term debt financing must usually be arranged on a much larger scale than lease financing, which can be adjusted to each individual unit of property acquired. This can be a valid reason for using lease financing to make occasional asset acquisitions spaced over a period of time. It loses its validity, however, when the total amount of capital additions over a given period is large enough to justify a debt issue. Long-term debt financing can be adapted to the timing of expenditures, either through the use of interim bank borrowings with a subsequent refunding, or by a direct placement of securities with institutional investors, providing for a series of takedowns.
Leasing makes it possible to finance capital additions on a piecemeal basis. For practical considerations, long-term debt financing must usually be arranged on a much larger scale than lease financing, which can be adjusted to each individual unit of property acquired. This can be a valid reason for using lease financing to make occasional asset acquisitions spaced over a period of time. It
loses its validity, however, when the total amount of capital additions over a given period is large enough to justify a debt issue. Long-term debt financing can be adapted to the timing of expenditures, either through the use of interim bank borrowings with a subsequent refunding, or by a direct placement of securities with institutional investors, providing for a series of takedowns.
3.Conclusion
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The vital role which accounting plays in the decisions of both corporate financial managers and investors cannot be denied. But it is also true that the accountant's devotion to maintaining a thread of consistency from year to year often makes changes in "generally accepted accounting principles" slow in coming about, with the result that these principles are sometimes in conflict with economic logic. And certainly the soundness of financial policy which subordinates common sense to accounting convention must be questioned.
Yet this appears to he the principal explanation for the trend toward lease financing. Accounting standards which were appropriate for the treatment of commercial leasing have proved wholly inadequate to cope with the growing challenge offered by the adaptation of the lease as a financing instrument. Out of these inadequacies has come a curious kind of logic which argues that the existence of an asset can be determined or denied by a ledger entry, and that a promise to pay becomes an obligation only if it is reflected in figures on a balance sheet.
This sort of rationalization may serve to ease the conscience of a management that is opposed to debt, or that has seen the amount of its debt climb to a disturbing level. But, unfortunately, it ignores certain basic economic facts of life. Every business requires certain fixed assets, and the choice available to it is not whether to finance these assets but how to finance them. Lease financing is one way of acquiring assets, but it is a form of borrowing — in most cases, a very expensive form.
Like all types of borrowing, lease obligations draw on the credit of the borrower, and credit is not a bottomless well. If it is used in one form, it is not available to be used again in another. Accounting deficiencies may have made it possible for some companies to have their cake and eat it, too; however, there is reason to believe that the advantage will be short-lived. There is evidence of a growing awareness among investors and financial analysts of the significance of lease commitments, and this must inevitably be reflected in accounting changes.
Only when these simple facts are understood and accepted can lease financing he viewed in its proper perspective. Perhaps some companies will still find in it advantages which make it preferable to other forms of financing in certain situations. But many others may discover it to be an illusion which has led them to trade economic advantages for accounting benefits.
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