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Synthetic Lease

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Financial Dictionary

Synthetic Lease

An operating lease that is structured in a way so that it is not recorded as a liability on the balance sheet. Instead, it is considered to be an expense on the income statement.

Investopedia Commentary

Basically, a synthetic lease allows a company to control real estate without being required to show the real estate as an asset on the financial statements

Related Links

Cooking The Books 101
Uncovering Hidden Debt
Advanced Financial Statement Analysis

See also: Lease, Leaseback

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Financial Dictionary

synthetic lease

A financing method that confers certain aspects of ownership to the lessee, who, for accounting purposes, treats the arrangement as an operating lease. Neither the asset nor the lease is included on the lessee's balance sheet. A synthetic lease is a type of off-balance-sheet financing that results in a company understating its financial obligations.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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