Ultimately, the structuring of a transaction as a service contract instead of a lease agreement should be based on the overall economic viability of the transaction and not just as a means of declaring the beneficiary off balance sheet. It seems that many tormentors and donors will look at these types of agreements to determine if they are useful to their needs, and again, off-balance sheet treatment should be only one factor in this provision. In the case of a solar installation, a typical air contract requires the taker to support all of the power produced, and the provider`s objective is to provide as much electricity as possible in order to maximize its revenue. Normally, the recipient of the service is not allowed to purchase electricity at the plant. It can be difficult to identify and collect contracts that may include on-board leases. This is because not all contracts that meet the accounting definition of a lease should be identified as leases. A contract is or includes a lease agreement when it provides the right to control the use of a particular asset (for example. B investment, property and equipment) over a fixed period of time for a fee. It is not uncommon for service contracts to give the customer the right to use a specific facility for the duration of the contract. While not all infrastructure contracts with a public body are service concession agreements, it is important to know when they are located, as there could be accounting consequences. Under the two rules of the IRC service contract, physical control and economic benefits are all factors that are used to assess compliance with the rules applicable to service contracts. After more than an hour of debate, the chambers agreed on the general management to clarify the distinction between leases and service contracts, but did not opt for the text. They agreed to give researchers “flexibility” in developing new examples that take into account the observations of companies and board members.
The purpose of the asset is often predetermined; An example is a solar installation whose sole purpose is to produce energy. For these predetermined assets, neither the recipient nor the supplier have the right to direct their use. In this case, it is determined by the nature of the asset or the operating agreement, in which case the next question arises as to whether the customer can change the instructions for use throughout its use.