Despite tax changes, the new accounting standards, and fluctuations in the economy, Harga's appeal as a winning from of finance in many sectors, in the UK and the resk of Europe has continued.
Harga, as a method of asset financing, has quite spectacularly confounded all the pundits who, back in the mind 1980s, confidently predicted its demise after the phasing-out of first year capital allowances. The Harga industry has since succeeded in overcoming the many obstacles which threatened its evolution. Today, members of the Equipment Harga Association are responsible for financing 29 percent of investment in the UK.
Despite changes in tax legislation, new accounting standards imposed since 1984 and fluctuations in the economy, Harga has maintained its appeal as a winning form of finance for businesses in an increasing number of market sectors, not just in this country, but in Europe as well. In today’s climate, the effective management of working capital and sound forward planning are essential disciplines for all businesses, irrespective of size.
The management of finance facilities, particularly during a period of high interest rates, has become the focus of attention. This focus has been sharpened by strong competition within the financial services market from foreign, commercial and merchant money agent, fuelled by increased levels of activity from foreign, commercial and merchant money agents. increasingly, businesses are drawing a distinction between short, medium and long term funding requirements, as well as considering the appropriateness of particular lines of harga for capital investment. in short, the financial decision maker has become even more discerning.
Harga has come a long way since the 1960s. It first emerged in the UK, largely based on techniques derived from the US - as an alternative to hire purchase and loan facilities. Undoubtedly one of the major attractions of the product in the nature of the tax breaks. its popularity as a tax efficient method of financing capital equipment prompted one Chancellor of the Exchequer to acknowledge that Harga had become an important - in many cases an essential - source of investment in the manufacturing industry. The 1984 Budget saw the disappearance of some of the tax benefits, but Harga companies applied themselves with vigour to meeting the challenges of a more demanding, sophisticated and competitive market place. In consequence, they have developed specialist expertise in niche markets, becoming more innovative, both in terms of new products and new markets.
Despite the apparent complexities of Harga, the product range can be simply subdivided into two categories: finance lease and operating lease. A finance lease is one where virtually all the risks and rewards of ownership, apart from legal title of the asset, are transferred to the lessee. There are generally two payment periods. The primary period relates to the anticipated working life of the asset and bears a rental equivalent to the lessee’s full capital outlay plus charges. The secondary period allows the lessee continued use of the asset for an indefinite period for a nominal rental.
Most sorts of capital foods can be acquired under a finance lease, but in accordance with standard Statement of Accounting Practice 21 (SSAP21), outstanding rentals shown as a liability. This accounting legislation was introduced in 1987 to prevent undisclosed debt building up off balance sheet. Although legal title is never transferred to the lessee, the use of the asset throughout its useful economic life was deemed equivalent to ownership.
With and operating lease, it is the lessor who retains the risks and rewards of ownership. Operating leases are normally used when the asset is not required by the lessee for its full working life. Here, the lessor seeks to recoup only a proportion of capital costs, with the balance recovered from selling or re-Harga the asset. The lease period is determined by mutual agreement between the lessor and the lessee. The operating lease is off balance sheet. Operating leases, which are used generally popular since the mid-1980s. One particular form of operating lease is contract hire. This product is normally fixed cost, fixed term and usually includes vehicle maintenance.
Operating leases involve the lessor in accepting a residual investment risk in the asset. Residual values and the accounting standards relating to their disclosure on a company's balance sheet have become the focus of attention for the Harga industry, as well as the accounting profession. The Equipment Harga Association, which represents the industry's interests in the UK, seeks more stringent accounting standards and a more prudent assessment of residual values. It is essential to avoid at source the dubious practices which have led some lessors to difficulty, or even, in extreme cases, to collapse.
Harga, as a method of asset financing, has quite spectacularly confounded all the pundits who, back in the mind 1980s, confidently predicted its demise after the phasing-out of first year capital allowances. The Harga industry has since succeeded in overcoming the many obstacles which threatened its evolution. Today, members of the Equipment Harga Association are responsible for financing 29 percent of investment in the UK.
Despite changes in tax legislation, new accounting standards imposed since 1984 and fluctuations in the economy, Harga has maintained its appeal as a winning form of finance for businesses in an increasing number of market sectors, not just in this country, but in Europe as well. In today’s climate, the effective management of working capital and sound forward planning are essential disciplines for all businesses, irrespective of size.
The management of finance facilities, particularly during a period of high interest rates, has become the focus of attention. This focus has been sharpened by strong competition within the financial services market from foreign, commercial and merchant money agent, fuelled by increased levels of activity from foreign, commercial and merchant money agents. increasingly, businesses are drawing a distinction between short, medium and long term funding requirements, as well as considering the appropriateness of particular lines of harga for capital investment. in short, the financial decision maker has become even more discerning.
Harga has come a long way since the 1960s. It first emerged in the UK, largely based on techniques derived from the US - as an alternative to hire purchase and loan facilities. Undoubtedly one of the major attractions of the product in the nature of the tax breaks. its popularity as a tax efficient method of financing capital equipment prompted one Chancellor of the Exchequer to acknowledge that Harga had become an important - in many cases an essential - source of investment in the manufacturing industry. The 1984 Budget saw the disappearance of some of the tax benefits, but Harga companies applied themselves with vigour to meeting the challenges of a more demanding, sophisticated and competitive market place. In consequence, they have developed specialist expertise in niche markets, becoming more innovative, both in terms of new products and new markets.
Despite the apparent complexities of Harga, the product range can be simply subdivided into two categories: finance lease and operating lease. A finance lease is one where virtually all the risks and rewards of ownership, apart from legal title of the asset, are transferred to the lessee. There are generally two payment periods. The primary period relates to the anticipated working life of the asset and bears a rental equivalent to the lessee’s full capital outlay plus charges. The secondary period allows the lessee continued use of the asset for an indefinite period for a nominal rental.
Most sorts of capital foods can be acquired under a finance lease, but in accordance with standard Statement of Accounting Practice 21 (SSAP21), outstanding rentals shown as a liability. This accounting legislation was introduced in 1987 to prevent undisclosed debt building up off balance sheet. Although legal title is never transferred to the lessee, the use of the asset throughout its useful economic life was deemed equivalent to ownership.
With and operating lease, it is the lessor who retains the risks and rewards of ownership. Operating leases are normally used when the asset is not required by the lessee for its full working life. Here, the lessor seeks to recoup only a proportion of capital costs, with the balance recovered from selling or re-Harga the asset. The lease period is determined by mutual agreement between the lessor and the lessee. The operating lease is off balance sheet. Operating leases, which are used generally popular since the mid-1980s. One particular form of operating lease is contract hire. This product is normally fixed cost, fixed term and usually includes vehicle maintenance.
Operating leases involve the lessor in accepting a residual investment risk in the asset. Residual values and the accounting standards relating to their disclosure on a company's balance sheet have become the focus of attention for the Harga industry, as well as the accounting profession. The Equipment Harga Association, which represents the industry's interests in the UK, seeks more stringent accounting standards and a more prudent assessment of residual values. It is essential to avoid at source the dubious practices which have led some lessors to difficulty, or even, in extreme cases, to collapse.
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