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CLFP EXAM (History & Purpose of Leasing) with Questions & Answers Graded A
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CLFP EXAM (History & Purpose ofLeasing) with Questions & Answers
Graded A
What is the Competitive Quality Banking Act? - ✔✔Passed in 1987, the act, among other thing,
removed the max residual value limit from the bank's lessor business. This made bank leasing
programs more competitive.
What is the Financial Accounting Standards Board? - ✔✔Created by IRS in 1976, provide guidance
via their statements and opinions and play a role in shaping the industry.
What is the IRS Revenue Procedure 75-21? - ✔✔Further detailed the criteria used to
govern transactions for tax purposes.
What is FASB Statement # 13? - ✔✔Set forth comprehensive guidelines for both lessor and
lesser book accounting, giving greater uniformity for financial accounting of equipment leasing.
What is Accounting Standards Codification (ASC) 840? - ✔✔Introduced in 2009, it replaced
FASB Statement #13
What is Safe Harbor Leasing? - ✔✔Provide equal investment incentives to companies with different
tax liabilities but similar investment opportunities. It provides tax shelters with the assumption that
the incremental revenue generated by the investment would offset the tax deductions.
What is Economic Recovery Act (ERTA)? - ✔✔Passed in 1981, it was a revision of 1954 IRC. It
was believed that private sector would increase spending if taxes were sharply reduced
, What is Accelerated Cost Recovery Systems (ACRS)? - ✔✔Introduced via ERTA IN 1981, replaced the
more complex ADR depreciation system. It had only five (5) classes of assets ranging in useful life from 3-15
years and specifying the % to be written off each year. Eliminated the need to estimate useful life.
What is the Tax Equity & Fiscal Responsibility Act of 1981? - ✔✔Was passed in 1982 to increase
tax revenues lost under ERTA. It repealed Safe Harbor leases and replaced it with "finance leases".
What is the Deficit Reduction Act (DRA) of 1984? - ✔✔Means again to reduce deficit and increase
tax revenue. Introduced Time Value of Money as a method to adjust uneven rental steam for tax
purposes. Depreciation benefits were reduced. TRAC were recognized as true leases. True tax
treatment was disallowed for foreign corporations.
Currently how big is the leasing industry? - ✔✔American companies acquire $1 billion in
equipment each year of which 55% is leased.
What % of companies lease? - ✔✔8 of 10
How old is leasing? - ✔✔4000 years ago the Sumerians produced leases on clay tablets for ag
tools, water rights and animals. The Code of Hammurabi is an ancient record of Babylonian dating
back to 1700 bc
What is the Statue of Whales? - ✔✔In 1284 ad, the Statue of Whales was writtento deal directly with
leasing of personal property. It was further clarified in 1571 by a statute that defined who owned leased
equipment.
How did leasing get started in the United States? - ✔✔The onset of the Industrial Revolution ( in
the 1700's) provides opportunity for leasing particularly in railroads.
What is the Philadelphia Plan? - ✔✔The most well-known railroad finance plan considered to be
the precursor of today's conditional sales contract, equipment finance ageement and money over
money leases
How dis independent leasing companies start? - ✔✔In early 1900, independents formed because
they realized that many railroad companies did not want long term ownership of assets. They offered
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