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Leasing transactions are classified according to the quantity of participants, asset type, lease term and relevant object amortization, service volume, payback rate, market segment, nature of lease payments etc.

In the world practice the most common lease types are operating leasing and financial leasing.

The key difference between operating leasing and financial leasing is the impact each has on the balance sheet and the period of asset usage. With an operating leasing, the term is shorter than the expected useful life of the equipment.

With a financial leasing the term is longer, over which all asset value or important part thereof is amortized; the total value of asset is repaid by lease payments.

You will find that Financial leasing usually provides that:

• Equipment is deliberately purchased by the lessor according to the lessee's specifications and transferred to the lessee for a period not less than one year;
• The contract is concluded for the period of time which to the maximum equals the useful life of equipment and depreciation period, thus the lessee covers practically its cost in full;
• The leased asset is capitalized on the lesser's balance sheet and the lessee makes depreciation write-off that allows to optimize the taxable income;
• The lessee has a purchase option at the end of the lease term;
• The ownership of the asset passes to the lessee at the end of the lease term and upon fulfillment of all payment obligations;
• The expenses associated with asset maintenance are charged to the lessee's gross expenditures.

You will find that Operating leasing usually provides that:

• Equipment is transferred to the lessee in temporary use and is to be returned to the lessor once leasing period has expired;
• The contract is concluded for a short term, typically shorter than its useful life period;
• Lease payments do not cover the equipment cost for the lessor during the initial lease term.
• Leased asset is not capitalized on the lessee's balance so depreciation write-off is not applied.
• The lessee obtains a tax credit against VAT amount in the structure of a lease payment;
• Lease payments belong to gross expenditures of the lessee that respectively lowers the taxable income.

Presently the commonly used is leaseback - arrangement in which one party sells an asset to a buyer and the buyer immediately leases it back to the seller. So thus one continues to be able to use the asset, but no longer owns it. The purchase option is available at the end of the lease term, after that the full legal ownership of the leased asset is transferred to the initial seller. As a rule, leaseback is useful for those legal entities which are interested in raising money from the sale of asset.