314 Government Finance Statistics Manual 2014
the lease term at a price that is suffi ciently low
that the exercise of the option is reasonably cer-
tain, or- Th e lease term is for the major part of the econo-
mic life of the asset, or - At inception, the present value of the lease pay-
ment amounts to substantially all of the value of
the asset, or - If the lessee can cancel the lease, the losses of the
lessor are borne by the lessee, or - Gains or losses in the residual value of the asset
accrue to the lessee, or - Th e lessee has the ability to continue the lease for
a secondary period for a payment substantially
lower than market value.
A4.12 Th ese provisions in the lease contract may
not be conclusive that substantially all of the risks
have been conveyed. For example, if the asset is con-
veyed to the lessee at the end of the lease at its fair
value at that time, the lessor holds substantial risks
of owner ship. Th e lease is then considered to be an
operating lease. Financial leases are also called “fi -
nance leases” or “capital leases,” highlighting that the
motivation (paragraphs A4.10–A4.11) is to fi nance
the acquisition of a nonfi nancial asset. Internation-
ally accepted ac counting practices generally recog-
nize fi nancial leases in the same manner as in GFS.^2
A treatment akin to fi nancial leases is also adopted for
some public-private partnerships^3 (PPPs) (see para-
graphs A4.58–A4.65 and the 2008 SNA, paragraphs
22.154–22.163).
A4.13 Th e statistical treatment of fi nancial leases is
designed to capture the economic reality of such ar-
rangements, by treating assets under a fi nancial lease
as if they were purchased and owned by the user.
Th e lessee (economic owner) records the acquisition
of the asset that is fi nanced by an imputed loan. Th e
loan is redeemed through payments during the con-
tract (consisting of interest and original principal el-
(^2) At the time of publication of this Manual, the treatment of
fi nancial and operating leases is under review by international
accounting standard setters.
(^3) For example, a build, own, operate, transfer scheme could be
established to assign the risks and rewards of ownership to the
government, and the private partner would be treated as the
provider of a fi nancial lease.
ements) and any residual payment at the end of the
contract (or alternatively, by the return of the good
to the lessor). If the lessor is a fi nancial intermediary,
part of the pay ment is also treated as a service charge
(see paragraph 6.81).
A4.14 It is common, but not necessary, for a
fi nan cial lease to cover the whole economic life of the
asset. Regardless of whether the lease is for the whole
economic life of the asset or for less, the value of the
imputed loan, at inception, corre sponds to the mar-
ket value of the asset, and is valued at nominal value
throughout its life, in the same way as other loans.
Th e value of the loan consists of the present value of
the future payments due to the legal owner plus the
value of the asset at the end of the lease, as specifi ed
in the lease agreement.
A4.15 At the inception of the lease, the value of
the asset appearing on the balance sheet of the lessee
should be equal to the value of the loan owed to the
lessor at that time. At the end of the lease term, the
asset may be returned to the lessor to cancel the loan,
or a new arrangement, including the outright pur-
chase of the asset, may be reached between the lessor
and lessee. If the lease is for less than the expected eco-
nomic life of the asset, the lease usually specifi es the
value to the lessor at the end of the lease or the terms
under which the lease can be renewed. Any variation
in the price of the asset from the value specifi ed in the
lease agreement is borne by the lessee.
Resource leases
A4.16 A resource lease is an agreement whereby the
legal owner of a natural resource that macro economic
statistics treat as having an infi nite life makes it avail-
able to a lessee in return for a regular payment re-
corded as property income and described as rent.
In the case of resource leases, there is no change of
economic ownership and, therefore, the re source
continues to be recorded on the balance sheet of the
lessor, even though it is used by the lessee. Payments
due under a resource lease are recorded as revenue or
expense in the form of rent (1415 or 2814). By con-
vention, no consumption of fi xed capital is applied to
natural resources. Depletion of a natural resource is
instead recorded as an other change in the volume of
assets (see paragraph 10.52).