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Leasing equipment, (vehicles, servers, printers) is alternative to purchasing. With regard to capital leases and operating leases, each has a different purpose and s addressed differently in accounting.

A leased item creates an expense without ownership, while buying equipment results in an asset.

Capital leases are considered the same as a purchase where operating leases cover the use of the equipment for a specific period of time. There is a regular expense for the item.

The terms of a capital lease agreement show that the benefits and risks of ownership are transferred to the lessee.

• Capital leases are used for long-term leases and for items that don't become technologically obsolete, such as many kinds of machinery.
• Capital leases give the lessee (the person who is leasing) the benefits and drawbacks of ownership, so they are considered as assets, and they may be depreciated.
• These leases are considered as debts of the lessee.

In order to be considered a capital lease, the Financial Accounting Standards Board (FASB) requires that at least one of these conditions must be met:

• Title to the equipment passes automatically to the lessee by the end of the lease term
• The lease contains an option to purchase the equipment at the end of the lease at a bargain price, for substantially less than fair market value; sometimes this is a $1 purchase
• The term of the lease is greater than 75% of the useful life of the equipment.
• The present value of the lease payments is greater than 90% of the fair market value of the equipment.

Operating leases are sometimes called service leases and are used for short-term leasing (less than a year in length). These are usually high-tech in nature. The rental cost of an operating lease is considered an operating expense.

The lessee uses the property but does not take on the benefits or drawbacks of ownership, which are retained by the lessor.

A capital lease creates a debt for the lessee, and the lessor becomes a creditor. This usually makes sense for leasing hi tech equipment, or cars with high usage.

For cars, operating leases are used because the cars are being driven heavily and they are turned over for new models at the end of the lease. But an operating lease doesn't provide depreciation on the asset.

Leasing provides use of an asset without needing financing but leases are usually more expensive on a monthly basis and some leases are not eligible for tax-saving depreciation allowances.

For capital leases, risks and benefits are transferred to lessee. Lessee pays maintenance, insurance and taxes. Lease is considered as asset (leased asset) and liability (lease payments). Payments are shown in Balance sheet.

An operating lease provides the right to use only. Risks and benefits remain with lessor. Lessee pays maintenance costs. There is no risk of ownership. Payments are considered an operating expense and shown in Profit and Loss statement.

Operating leases are the lowest risk.

https://www.thebalancesmb.com/capital-leases-versus-operating-leases-398034

https://www.diffen.com/difference/Capital_Lease_vs_Operating_Lease

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As CBRE is a global organization with 2019 revenues of 23.9 billion and more than 100,000 employees. We lease facilities, equipment and vehicles. For example, in 2018 CBRE announced the opening of its new state-of-the-art office at the mixed-use campus on Camelback in Phoenix. The Esplanade in Phoenix. The new office is part of CBRE’s global “Workplace360” initiative, the company’s leading-edge approach to workplace strategy designed to promote flexibility, mobility and productivity through technology-enabled, 100 percent free-address and paperless offices. The Phoenix office is CBRE’s largest Workplace360 office in the world, at 75,000 square feet. The space, equipment and furnishings are all leased.

With regard to technology, CBRE On Demand integrated facilities management provides state of the art data and metrics to clients including specific costs related to their own locations and equipment. We provide mobile applications for technicians and APIs for vendor and client integrations. We lease state of the art servers to efficiently provide those services.

Leasing this amount of space and equipment transfers all the risk of ownership to the lessor. Benefits to CBRE include opportunities to quickly upgrade as needed on space, equipment and technology.

 

https://www.cbre.com/about/corporate-information