As a senior auditor of STP Ltd., suggest the accounting treatment and Tax benefits for:Manufacturing EquipmentSpecialised Manufacturing Equipment

In case of Manufacturing Equipment: Accounting treatment: Operating lease is generally treated like a renting arrangement. That means, the lease payments are treated as operating expenses and the asset does not appear as an asset on lessee's balance sheet. Tax Benefit: Since operating lease is as good as renting, lease payment is considered as expense. No depreciation can be claimed by the lessee. In case of Specialised Manufacturing Equipment: Accounting treatment: Finance lease is treated like loan arrangement. Hence, the asset ownership is considered of that of the lessee and thus appears on the balance sheet of the lessee. Tax Benefit: Lessee can claim both interest and depreciation expense as financial lease is treated like a loan.