CISCO Financing Glossaries

8/14/2019 CISCO Financing Glossaries

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Contents1 Glossary o Acronyms and Abbreviations

2 Glossary o Documents

3 Glossary o Financial Terms

Glossary of Acronymsand Abbreviations

ACTAdvance Corporation Tax.

AOP

Assignment o Proceeds is a three par ty agreement specicto a Cisco Capital PO signed by a Reseller (Partner),

Distributor and Cisco Capital.

C o A (COA)Certicate o Acceptance.

CMFSCisco Management Financial Services.

CTCorporation Tax.

DCFDiscounted Cash Flow. Where the time value o cash fow is

taken into account, and todays value o a series o payments

or receipts declines as they are moved urther into the uture.

DSODays Sale Outstanding.

DOADead on Arrival.

DOCsDocumentation.

EBITDAAcronym or earnings beore interest, taxes, depreciation

and amortisation. The same calculation can be arrived at

rom operating income beore depreciation and amortisation

(OIBDA). It is one measure o operating cash fow.

EURIBOREuro Interbank Oered Rate is a daily reerence rate based

on the averaged interest rate at which banks oer to lend

unsecured unds to other banks in the Euro wholesale money

market (or interbank market).

FASB 13

Financial Accounting Standards Board 13 Accounting or Leases;Sets out nancial accounting standards or leases in the US.

FHBRFinance House Base Rate.

GAAPGenerally Accepted Accounting Principles the standard

ramework o guidelines or nancial accounting. It includes

the standards, conventions, and rules accountants ollow in

recording and summarising transactions, and in the

preparation o nancial statements.

HPHire Purchase. A type o purchase requiring the buyer to pay

or the goods in instalments. Title does not pass to the hirer

until the purchase option is exercised ater the last instalment.

IRRInternal Rate o Return (IRR) is a capital budgeting method

used by rms to decide whether they should make long-term

investments. The IRR is the annualised eective compounded

return rate which can be earned on the invested capital, ie the

yield on the investment.

LIBOR (IBOR)London Inter-Bank Oered Rate (Inter-Bank Oered Rate). The

interest rate charged by one bank to another. Covers periods

ranging rom overnight to one year.

LMLeasing Manager.

LSMLease Service Manager.

MLAMaster Lease Agreement.

POPurchase Order.

POAPurchase Order Assignment.

PPAProgress Payment Agreement.

SSAP21Statement o Standard Accounting Practice that denes a lease,

other than a nance lease, as an operating lease.

VARValue Added Reseller.

VAR BIDValue Added Reseller Bill-to ID.

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Finance Glossaries

Glossary of Documents

Agreement to Lease EquipmentA standalone lease where all terms o the Master Agreement

to Lease and Schedule are wrapped into one document.

Certifcate o Acceptance (Delivery and Acceptance)

A document whereby the lessee acknowledges that the

equipment to be leased has b een delivered, is acceptable,

and has been manuactured or constructed according to

specications.

Equipment Schedule

A document that describes in detail the equipment being

leased. It may also state the lease term, commencement date,

repayment schedule, purchase options, and locations o the

equipment.

Loan Agreement

A standalone nancial agreement used in lieu o a lease

agreement where all terms, conditions, and payments schedule

are dened. This document is used by Cisco Capital to nancesotware, maintenance and proessional services when no

equipment is present in the transaction. Cisco Capital loan

agreements are available in Denmark, Finland, Ireland, Italy,

Netherlands, Norway, Sweden, Switzerland and the United

Kingdom.

Master Agreement to Lease

A contract in which the Lessee leases currently needed assets

and is able to acquire other assets under the same basic terms

and conditions without negotiating a new contract.

Progress Payment Agreement

An Agreement wherein the Lessee authorises the Lessor

to orward unds to the Partner beore the acceptance

documentation has been executed.

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Finance Glossaries

Glossary of Financial Terms

Actuarial Methods o AccountingAccounting methods where cash earned during a lease is

periodically removed rom the lessor s investment account

according to a xed proportion o the balance outstanding.

Agent

An authorised party acting on behal o another party.

Agency Agreement

An agreement detailing the terms under which an agentshall act.

Amortise

Depreciate or reduce in value.

BACS

Bankers Automated Clearing System.

BulletA one o payment rom a lessee which can be collected

at anytime during a lease.

Breach or Deault o an Agreement

Failure to comply with a term o an agreement.

Captive

A subsidiary whose purpose is to provide nancing to

customers buying the parent companys product. The captive

nance company (Cisco Capital) is usually wholly owned by

the parent company (Cisco Systems).

Conditional Sale

A type o purchase where the buyer pays or the goods in

agreed instalments, ater which title passes automatically.

Transer o title is not dependent on exercising an option to buy,

as in Hire Purchase.

ContractAn Agreement between two or more parties where

consideration (benet or value) has passed.

Credit Sale

A type o instalment sale, where possession and title pass

when a purchaser contracts to pay by a series o subsequent

payments.

Cross Border

Leases where the lessor and lessee are in dierent countries.

Encumbrance

A liability attached to property e.g. a lien, mortgage or charge.

Endorsement

A modication to an agreement accommodating individual

circumstances relating to the lease terms.

Equalised Repayment

A variable rate agreement whereby the rental remains xed, the

term is adjusted to compensate or additions / reductions in the

interest rate percentage.

Execution

The enorcement o a court judgement.

Export Leasing

Cross border leasing where the leased equipment is

manuactured in the country o the lessor.

Extension, Renewal or secondary Period

The continuation part o a nance agreement i the lessee

retains equipment ater the primary period has expired.

Finance Lease

A lease or a non-cancellable primary period, dened under

SSAP 21 as one that transers substantially all the risks and

rewards o ownership o an asset to the lessee.

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Finance Glossaries

Glossary of Financial Terms(continued)

Full Payout LeaseA nance lease.

Fully Amortising

Where the value o an asset is written o in ull over the lie

o an agreement.

Guarantee

A legally binding agreement with a party (guarantor) agreeing

to guarantee some or all o the responsibilities o the lesse e

should the lessee ail to meet them There must be s ome benet

to the guarantor in agreeing to guarantee the lessee.

Hardware

Physical product such as computer equipment, rather than

services or sotware.

Hiring or Renting

Financing, usually over a shorter period and with the equipment

typically selected rom the hirer, not a manuacturer.

Holiday

Oten used as meaning terminal pause, but can describe

a period where the lessee makes no payments during a

primary period.

Indemnity

Protection given to one party by another, where there

is agreement to make good any loss su ered.

Initial Pause

A deerred period o rentals where the lessee makes no

payments at the beginning o a nance agreement, there

would be no terminal pause (see explanation below) nominally.

Lease

A contract between a lessor and a lessee or the use o a

specic asset selected rom a manuacturer or vendor. The

lessor retains ownership o the asset and the lessee haspossession and use o the asset upon payment o specied

rentals over a period o time.

Lease Profle

The number, timing and requency o lease rentals or

instalments.

Lessee

The user o the equipment being leased.

Lessor

The party to a lease agreement who has legal or tax title to

the equipment, grants the lessee the right to use the

equipment or the lease term, and is entitled to the rentals.

Letter o Comort

A letter by which one party indicates its intention given a

possible event. It is not legally binding like a guarantee, and

usually only has moral orce.

Licence and Assignment

The transer o a nance agreement to another party. The

authority to transer is the Licence; the actual transer is

the Assignment.

Lien

The right o one party to keep in its posse ssion property

belonging to another until legal claims against the otherare satised.

Lease Purchase

HP or hire purchase.

Loan

Funding isnt tied to a xed asset. The borrower initially does

receive an amount o money rom the lender, which they pay

back, usually but not always in regular instalments, to the lender.

This service is generally provided at a cost, reerred to as

interest on the debt.

Mainstream Corporation Tax

Corporation Tax payable at the basic rate prevailing at the time.

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Manuacturers Support Scheme

An agreement between a manuacture o equipment and

a lessor to provide nancing acilities to its customers.

Margin

A percentage above a lessor s cost o unds. May involve

deducting overheads and corporation tax.

Master Lease Agreement

An agreement between a lessor and a lesse e speciying the

terms and conditions o all uture leases or schedules.

Non-Captive

Best described as an independent outsourced nancing

partner, where the captive organisation (Cisco Capital) does

not have a legal presence to provide either in country structural

or, cross border nancing solutions. The outsourced nancing

partner oers nancial products and services using the

nancial resources at its disposal, on behal o Cisco Capital.

Non-Tax Based Leasing

Leases in which the lessor does not take into account capital

allowances into the rental calculations.

Novation

Where the terms o an existing agreement are transerred to a

new party. Sometimes known as a Tripartite Agreement, since

there are three parties involved.

O Balance Sheet

Usually means an asset or debt or nancing activity not on

the companys balance sheet.

Operating Lease

A lease where the cost o the asset is not wholly amortised

during the primary period o the lease, and which satises

certain provisions o SSAP21.

Peppercorn Rent

A very low or nominal rent, usually applies in the secondary

period o a nance lease.

Post-Inception Variable

A nance rate/rental which is variable AFTER the lease being

incepted.

Pre-Inception Variable

A nance rate/rental which is variable PRIOR to the lease being

incepted.

Pre-Lease

An agreement between a lessor and lessee prior to lease

execution, committing the lessee to lease goods at a uture date.

Primary Period

The rst period o a nance agreement.

Renting

Financing, usually over a shorter period and with the equipment

typically selected rom the renter, not a manuacturer.

Re-Purchase Agreement

Agreement where the manuacturer agrees to re-purchase

equipment or an agreed percentage o the original cost at the

end o the lease. Sometimes reerred to as buyback.

Residual Value Balloon

Where an asset is amortised to a particular predicted Residual

Value at the end o the primary period.

Return On Investment

The margin over cost o unds obtained rom the investment in a

nance agreement.

Sale and Leaseback

A type o leasing, where title o an asset is transerred to a

lessor rom a lessee and then leased back to the lessee.

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Sales-Aid LeasingAn agreement between a manuacture o equipment and a

lessor to provide nance acilities to its customers.

Scheduled Balance

A variable rate agreement whereby the rental is variable

according to percentage interest rate movements, the term is

xed. Interest rate percentages can be attributed to opening

balances o capital, and collected at dierent or matching

period to the capital amount.

Seizure

Conscation o propert y without the owners consent.

Sideletter

A letter or agreement which amends or varies another

agreement to accommodate individual circumstances.

Small Ticket

Low value nance agreement, typically less than 25,000

(e25,000).

Sub-Lease

Where a lessee re-leases to a third party and the lease

agreement between the original lessee and lessor remains

in eect.

Stub

A one o payment rom a lessee which is collected at the

beginning o a lease, normally with the rst rental/s.

Taxable Capacity

Those prots on which a company is liable to pay mainstream

corporation tax.

Tax Based Leasing

Leases in which the lessor takes into account capital

allowances in the calculation o lease rentals.

Tax Exhaustion

Having insucient taxable prots to take advantage o capital

allowances due.

Tax Loss

The excess o allowances over and above taxable prots.

Terminal Pause

The period o time (at the end o primary rentals) in which no

rentals are due rom the lessee because there were payment(s)

made in advance.

Tranche

A slice or piece o business.

Tripartite Agreement

Where the terms o an existing agreement are transerred to a

new party, alternatively an agreement between three par ties.

Useul Lie

Economic lie o an asset. The period o time during which an

asset will have economic value and be useable.

Waiver

An agreement where a party agrees not to insist on a right

which it would otherwise have.

Writing Down Allowances

The percentage o an assets cost which can be oset yearly

against a companys tax bill.

Year End

The end o a trading year. Many leasing companies have

subsidiary companies with more than one year end.

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