Basics for the positive development of a leasing industry in Europe Legal system Leasing is characterized by the fact that the leasing company leases an item to a client. Leasing differs substantially to a purchase on credit. The leasing company transfers some or all risks on the item to the lessee, but not title of ownership. Only at the end of the contract is a transfer of title possible. One of the key issues of leasing is title.
Title is the only security which the leasing company has.
In the case where lease payments are not made, leasing companies must be able to retrieve the leased item from the lessee in order to avoid losses. Another important question is what happens if the lessee declares bankruptcy or defaults on the lease payments. There is currently a world wide discussion on which is the right way to present the balance sheet. The accounting of lease contracts is an important aspect of leasing, especially in countries where accounting has an impact on taxation. The lessee does not show the leased asset or liability in his balance sheet and is consequently not entitled to depreciate.