What Is The Difference Between A Lease And A Service Agreement

Category: Allgemein

A customer enters into a 10-year contract with a supplier for the right to use five individually specified fibre fibres in a larger cable between New York and London. The customer makes all relevant decisions about the use of each fiber by using them on their own electronic devices (i.e. the customer „lights“ the fibers) and decides what data and the amount of data each strand will take with you. If one of the strands is damaged, the supplier is responsible for the necessary repairs. The supplier has additional fibers inside the same cable and in adjacent cables, but can only replace them with customer strands in the event of ongoing maintenance or necessary repairs. Some assets may have several general uses .B. Some railway cars may, for example, be used for shipping products other than grain and may be used on different general shipping routes that can be routed by the customer. If the debitor indicates the way forward, as it balances the time to ship against the costs, the debitor can control the installation and the transaction may contain a lease. The main questions to be answered are the „service“ provided and how it is provided. The challenges ahead if the service contract also uses a resource as an integral part of the provision of that service. The application of the new definition includes three key assessments, all of which must be completed to conclude that a contract is or includes a lease.

These assessments are summarized in the following diagram: In a contract between a customer and a supplier, the supplier must transport goods with a specific type of rail vehicle over a three-year period, according to a specified schedule. The schedule and quantity of goods prescribed correspond to the customer who uses six railcars for three years. The supplier supplies the cars, drivers and engines as part of the agreement. The supplier has a wide range of vehicles and similar engines available to meet the obligations arising from the agreement. Railway cars and engines are kept with the supplier if they are not used to transport goods. To the extent that the agreement can effectively be considered a service agreement under IRC 7701 (e) (1), the inclusion of a declaration to that effect may provide additional support for the qualification of the agreement as a service agreement for accounting purposes. ASC 842-10-55-1 contained a decision tree to help someone decide whether an agreement is or contains an agreement, however, transaction analysis may not always flow in such a linear path. From an economic point of view, if the recipient had that right, the service provider would likely need a fixed payment component within the payment structure.

Otherwise, the service provider would probably not be able to enter into such a transaction, as it would have no guarantee of performance unless the service provider had another source to which it could sell the electricity. Assuming that an asset produces a form of utility that can be measured economically; For example, a railway car is used to move grain, and the contractor pays for the movement of grain on the basis of loads.