An Investigation of the Financial, Economic, and Accounting Aspects of Leasing

Date of Submission


Document Type


Degree Name

Master of Science in Accounting




Robert Rainish


Lease and rental services--Accounting

Call No. at the Univ. of New Haven Library

AS 36 .N29 Acc. 1983 no.10


Leasing aids economic units in their quest to maximize expected utility by allocating savings to the most promising investment opportunities.

In efficient and perfectly competitive markets the dominant reason for the existence of leasing is differences in the tax benefits associated with owning an asset. Financial managers consider leasing versus purchase of assets and choose the appropriate alternative. In the framework of efficient markets and capital asset pricing the financial manager is able to relate risk profitability information and share price when analyzing corporate investment decisions.

The key to the efficient allocation of resources is the identification of the most promising investment opportunities, therefore accountants strive to describe the economic substance of the lease by recording the transaction in financial statements if it transfers substantially all of the benefits and risks incident to ownership. This makes relevant economic information available to all financial statement users on an equitable basis.

What follows is the development of a conceptual framework based on the allocation of savings to investment, capital asset pricing, and modern finance theories. It is in this framework that the financial, economic, and accounting aspects of leasing and lease reporting are evaluated.