Pricing the lease during the contract: an in‐progress approach to lease evaluation

Casellato, Alessandro; Nicolini, Gianni

doi:10.1108/03074350910984719

Cited by 3 publications

(2 citation statements)

References 23 publications

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“…In the current version we assume that the repayment cash flow incorporates the market value at any time. An admissible extension concerns the possibility of a rescue price, see Tagliavini et al (2009). Note 3.…”

Section: Notesmentioning

confidence: 99%

Early Termination Clauses for Leasing Contracts with APR Cap

Quattrocchio¹,

Tibiletti²,

Uberti³

2018

IJBM

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Terminating a leasing contract early may entail the payment of additional charges attributable to penalty and late payment costs. The occurrence of these extra charges push the lease effective Annual Percentage Rate (APR) up. The aim of this note is to discuss the contract early termination extra charge conditions which guarantee the no exceedance of a given APR threshold, whenever the contract expires. In the event the contract provides the lessee the option to terminate the lease prior to the first payment, extra charges shoot APR extraordinarily up and so the penalty costs should be set at zero. In the occurrence that the contract terminates upon the first payment date due to lessee’s exercise of the early termination option, the most severe compliance conditions are those if the termination occurs at the first payment date. If the early termination occurs for lessee’s insolvency, the most severe compliance condition is at correspondence of the first admissible date of the contract redemption for insolvency after a minimum number of unpaid payments. The late payment cost compliance condition requires only that the late payment interest rate not exceeds the given APR cap. Our findings hold whatever the payback amortization is set at the date of entering into the contract. If the French amortization (fixed installments) is used, the compliance constrains turn out looser than those valid for a general amortization.

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Section: Notesmentioning

confidence: 99%

Early Termination Clauses for Leasing Contracts with APR Cap

Quattrocchio¹,

Tibiletti²,

Uberti³

2018

IJBM

View full text Add to dashboard Cite

show abstract

“…Designing leasing contract conditions that allow to move EAR -all else being equal -is a key issue in developing contract conditions on the pattern of payments (see Carretta & Nicolini, 2009;Quattrocchio et al, 2018). A general rule comes out: to stick EAR to the contract lease rate the Macaulay Duration should be set long.…”

Section: Introductionmentioning

confidence: 99%

Pricing a Lease Contract in Presence of Late Payment Extra-Charges

Quattrocchio¹,

Tibiletti²,

Uberti³

2019

IJBM

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Partial insolvency in leasing contracts may entail to afford additional late payment costs. In this paper we focus on the case that the lessee makes partial payments in due time and settles the debt augumented by the late payment interests later. The presence of the extra-costs drives the lease Effective Annual interest Rate (EAR) to deviate from the lease contract rate. The aim of this work is to illustrate how design the contract payback amortization to stick EAR to the lease contract rate, when the lease contract rate, the late payment rate and the contract term are exogeneously fixed. First we achieve a proxy for EAR given by the lease contract rate plus an extra-charge rate addendum. We show that this latter addendum is sensitive to the payback Macaulay Duration, a weighted size and timing average. Specifically, the longer the Macaulay Duration, the smaller the extra-charge rate addendum. As a consequence, two general rules to drive EAR close to the lease contract rate roll out, specifically: (1) the payment pattern should be set with a long Macaulay Duration; and (2) the surrender value of the leased good should be put large. As the contract settlement is given, we show that EAR is delimited by a lower bound and an upper bound. Then the payback amortizations with fixed instalments are studied. To get insight on the importance of EAR inputs we roll sensitivity analysis out through illustrative applications. The results of the paper are useful to provide policymakers a better knowledge about the effects on EAR of the contract conditions on the pattern of payments.

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International accounting frameworks: The convergence of corporate financial statements

Toudas¹

2018

JGR

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Globalization and the gradual opening of financial frontiers have acted as an imperative in having homogeneity in the reporting frameworks and the financial statements of the entities in public and private sectors both nationally and internationally. The on-going global financial crisis, as well as the lack of investors’ confidence in stock markets, has increased the necessity of a common approach in accounting standards. Certified Public Accountants (CPA’s) from 7 different European countries took part in the present study, whose purpose was to identify the main differences between the two most used accounting standards, the IFRS and the US GAAP. Quantitative research revealed that there are differences in both the balance sheet presentation of debt and classification of D. Tax assets/liabilities, as well as the presentation of extraordinary items in the income statements. The research concludes the developments and the governance of existing reporting frameworks over the last decade, from which conclusions are drawn, and future studies towards the convergence are suggested

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Pricing the lease during the contract: an in‐progress approach to lease evaluation

Cited by 3 publications

References 23 publications

Early Termination Clauses for Leasing Contracts with APR Cap

Early Termination Clauses for Leasing Contracts with APR Cap

Pricing a Lease Contract in Presence of Late Payment Extra-Charges

International accounting frameworks: The convergence of corporate financial statements

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