Buy or lease soft drink bottle

[Solee]

Lease of bottle for soft drink and beer should fall under finance lease. However, is there any condition that can make it (sales of become operation lease.

 

[kirby]

Must be a very large bottle!

 

[Solee]

Not really a large bottle. Small bottles that will large for 2-3 years, The question is that, can operating lease be use instead of fincnace

 

[kirby]

At the end of the lease are the bottles returned to you?

 

[Solee]

The bottle is customized for the lessee and cannot be use by anybody else. The lease agreement is to due to cash constraint by the lessee.
Some of the challenges include the fact the following:
- Even though the bottle have 3 years life span, many will be broken even from day one due to accident or other reason
- If the bottle last for more than 3 years it will still be with the lessee.

Finance lessee who have been ideal ordinarily.

 

[kirby]

No way this can be an operating lease.
The operating lease presumes there is a chance the equipment will come back to the lessor.
The financing lease recognizes that there is no chance of this so the financing lease is essentially a secured sale of the equipment.
Since you will never get the bottles back you have "sold" those bottles and can only have a financing lease.

 

[Solee]

Thank you. This confirm my argument to my boss. Very grateful for your timely response.