Lend-Lease

(noun)

A policy, formally titled "An Act to Promote the Defense of the United States," enacted March 11, 1941, under which the United States supplied Free France, the United Kingdom, the Republic of China, and later the USSR and other Allied nations with food, oil, and material between 1941 and August 1945. This included warships and warplanes, along with other weaponry.

Related Terms

Examples of Lend-Lease in the following topics:

  • America's Growing Involvement in WWII

    • From 1941-1945, the U.S. provided weapons and war materials to Allied forces under the Lend-Lease Act.
    • Lend-Lease was a critical factor in the eventual success of U.S.
    • From 1943–1944, roughly a quarter of all British munitions came through Lend-Lease.
    • FDR signs the Lend-Lease Act in 1941, marking greater U.S. involvement in WWII
    • Describe how the "cash and carry" policy, the Destroyers for Bases Agreement, and the Lend-Lease Act all contributed to U.S. involvement in World War II.

  • Interventionism

    • The second phase was the Lend-Lease Act of early 1941 .
    • This act allowed the President "to lend, lease, sell, or barter arms, ammunition, food, or any ‘defense article' or any ‘defense information' to ‘the government of any country whose defense the President deems vital to the defense of the United States.'
    • The Lend Lease Act allowed the United States to tip-toe from isolationism while still remaining militarily neutral.

  • Capital Leases vs. Operating Leases

    • Capital leases and operating leases are two types of leases with different criteria.
    • A capital lease (or finance lease) is a type of lease.
    • Under US accounting standards, a finance (capital) lease is a lease which meets at least one of the following criteria:
    • An operating lease is a lease whose term is short compared to the useful life of the asset or piece of equipment (an airliner, a ship, etc.) being leased.
    • Unlike a Financial Lease or Finance lease, at the end of the operating lease the title to the asset does not pass to the lessee, but remains with the lessor.

  • Does leasing always close the manufacturing loop?

    • Sometimes a customer will purchase a leased product at the end of the lease term and never return it to the manufacturer.
    • Similarly, after a transfer of ownership, the customer may sell the leased product on the second-hand market.
    • Both of these practices can break the closed-loop cycle needed for leasing to provide its benefits.
    • In this regard, products may need months or perhaps years of redesigning or rethinking before leasing can become profitable.
    • (Fishbein, Bett, McGary, Lorraine, and Dillon, Patricia, ‘Leasing: A Step toward Producer Responsibility', Inform Inc.)

  • Advantages of Leasing

    • The main advantage of leasing lies in a business' ability to attain assets without outlaying essential cash.
    • For businesses, leasing property may have significant financial benefits, which are outlined below:
    • Leasing is less capital-intensive than purchasing, so if a business has constraints on its capital, it can grow more rapidly by leasing property than by purchasing property.
    • Leasing shifts risks to the lessor, but if the property market has shown steady growth over time, a business that depends on leased property is sacrificing capital gains.
    • Leasing may provide more flexibility to a business which expects to grow or move in the relatively short term, because a lessee is not usually obliged to renew a lease at the end of its term.

  • Overview of Lease Accounting

    • There are two types of leases: capital leases and operating leases and each has a different accounting methodology.
    • There are two types of leases capital leases and operating leases.
    • A capital lease is a form of debt-equity financing in which the lease acts like loan.
    • Under an operating lease, the lessee records rent expense (debit) over the lease term, and a credit to either cash or rent payable.
    • Lease Bonus: Prepayment for future expenses.

  • Leasing

    • For example, customers often lease software products.
    • Additional advantages of B2B leasing agreements include flexible lease-to-own programs.
    • A lease can be structured to allow the purchase of equipment at the end of the lease for fair market value of the hardware.
    • However, some leases will allow product upgrades before the end of the lease.
    • Leasing terms sometimes include hidden fees and penalties at the conclusion of the lease, all of which can cost the organization extra money.

  • Institutions, Markets, and Intermediaries

    • Other financial intermediaries include: credit unions, private equity, venture capital funds, leasing companies, insurance and pension funds, and micro-credit providers.
    • Additionally, through diversified lending practices, banks are able to lend monies to high-risk entities and by pooling with low-risk loans are able to gain in yield while implementing risk management.

  • Uses of the Financial Statement

    • Whether to acquire or to rent/lease certain equipment in the production of goods.
    • A lending institution will examine the financial health of a person or organization and use the financial statement to decide whether or not to lend funds.

  • Impact of Leasing on the Income Statement

    • In accounting, leases can be considered either operating leases or capital leases (also called financial leases).
    • The present value of the minimum lease payments (MLP) is equal to or greater than 90% of the fair market value of leased property
    • If any one of these criteria are accurate in a given leasing contract, the lease is considered a capital lease and thus will impact the assets and liabilities of the balance sheet.
    • The lessee records rent expense (debit) over the lease term, and a credit to either cash or rent payable when on an operating lease.
    • With a capital lease, the lessee does not record rent as an expense.