
What Is A Synthetic Lease??
A good question. Here is a short explanation. A synthetic lease occurs when a special purpose entity established by a parent company purchases an asset then leases it back to the parent company. As a result, the asset is shown on the balance sheet of the special purpose entity, which treats the lease as a capital lease and charges depreciation expense against its earnings. However, the asset does not show up on the balance sheet of the parent company. Instead, the parent com