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10-K - FORM 10-K - Macquarie Equipment Leasing Fund, LLCv366919_10k.htm
XML - IDEA: XBRL DOCUMENT - Macquarie Equipment Leasing Fund, LLCR20.htm
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EXCEL - IDEA: XBRL DOCUMENT - Macquarie Equipment Leasing Fund, LLCFinancial_Report.xls
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EX-32.2 - EXHIBIT 32.2 - Macquarie Equipment Leasing Fund, LLCv366919_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - Macquarie Equipment Leasing Fund, LLCv366919_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - Macquarie Equipment Leasing Fund, LLCv366919_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Macquarie Equipment Leasing Fund, LLCv366919_ex31-1.htm
v2.4.0.8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy)
12 Months Ended
Dec. 31, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
Basis of Accounting and Use of Estimates

Basis of Accounting and Use of Estimates

 

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

Cash and Cash Equivalents

 

The Fund considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents are maintained with one financial institution.

 

Restricted Cash

Restricted Cash

 

Restricted cash consists of cash collected from the lessee of the CRJ 700 ER aircraft for maintenance costs.

 

Income Taxes

Income Taxes

 

The Fund is treated as a partnership for federal and state income tax purposes. As a partnership, the Fund is not subject to federal and state income taxes, while each member will be individually liable for income taxes, if any, on their share of net taxable income from the Fund. Interest, dividends and other income realized by the Fund may be subject to withholding tax in the jurisdiction in which the income is sourced.

Leased Equipment at Cost

Leased Equipment at Cost

 

Investment in leased equipment is stated at cost less accumulated depreciation. Leased equipment is depreciated on a straight-line basis over the lease term to the assets' residual value. Initial direct costs (such as freight, installation, acquisition fees and expenses, legal fees and inspection fees) associated with the leases are capitalized as part of the cost of the leased equipment and depreciated over the lease term.

 

The lease term from the acquisition date by the Fund of each item of equipment is as follows:

 

    Lease  
    term (in years)  
Aircraft engines (2 x CFM56-7B jet engines)     9  
Aircraft (Bombardier CRJ 700 ER)     3  
Self-serve checkout equipment     5  
Flat bed rail cars     5  
Racetrack equipment     4  
Smart safes     5  
Machine tool equipment     5  
Aircraft (Airbus model A320-200)     2.5  

 

The residual value and useful life are determined by the Fund's Manager and are calculated using information from both internal (i.e. from affiliates) and external sources, such as trade publications, industry valuers, auction data, internal sales data, equipment dealers, wholesalers and industry experts, as well as inspection of the physical asset and other economic indicators. Once an asset comes off lease or is re-leased, the Fund reassesses its useful life and residual value.

 

Costs incurred in extending the useful life and/or increasing the resale value of leased equipment are capitalized into the cost of an asset. No such costs have been incurred to date.

 

Upon the end of a lease term, if the lessee has not met the return conditions as set out in the lease, the Fund is entitled in certain cases to additional compensation from the lessee. The Fund's accounting policy for recording such payments is to treat such payments as revenue. No such compensation was received for the year ended December 31, 2013.

 

The lessee is generally responsible for the ongoing maintenance costs of the equipment under net lease arrangements.

 

The significant assets in the Fund's portfolio are reviewed for impairment at least annually or when indicators of impairment exist. An impairment loss will be recognized only if the carrying value of a long-lived asset is not recoverable and exceeds its fair market value. The Manager's assessment for impairment (i.e. undiscounted cash flows used in the recoverability assessment) includes review of published values for similar assets, recent transactions for similar assets, lease terms, asset condition, adverse changes in market conditions for specific asset types and the occurrence of significant adverse changes in general industry and market conditions that could affect the fair value of the asset. No impairment charges were recorded for the years ended December 31, 2013 and 2012.

 

Net Investment in Finance Lease

Net investment in finance lease

 

If a lease meets specific criteria under ASC 840 at the inception of the lease, then the Fund recognizes the lease as a net investment in finance lease on its Balance Sheets. The amounts recognized for finance leases consist of lease receivables, plus the estimated unguaranteed residual value of the leased equipment on the lease termination date, less the unearned income.

 

The residual values of the Fund's finance lease assets are reviewed at least annually. If the review results in a lower estimate than had been previously established, the Fund will determine whether the decline in the estimated residual value is other than temporary. If the decline in estimated residual value is judged to be other than temporary, the accounting for the transaction shall be revised using the changed estimate and the resulting reduction in the net investment shall be recognized as a loss in the period in which the estimate is changed. An upward adjustment of a leased asset's estimated residual value (including any guaranteed portion) shall not be made.

 

Maintenance Reserve

Maintenance reserve

 

Under the lease agreement for the Fund's Bombardier CRJ 700 ER aircraft, the lessee is responsible for the costs of major maintenance on the components of the aircraft, including the engines, airframe and landing gear at an approved maintenance facility in accordance with the manufacturer's recommended maintenance guidelines. The lessee is required to pay the Fund additional rentals, calculated monthly, which are based on the prior month's flight hours and flight cycles. These additional rentals are set aside for future maintenance costs and are recognized as restricted cash on the Fund's Balance Sheets when paid by lessee. As the maintenance is performed, and to the extent that the lessee has met all of its obligations under the lease, the lessee is reimbursed for costs incurred up to, but not exceeding, the related additional rentals the Fund receives from the lessee for maintenance. At the completion of each major maintenance event, the difference between the liability and reimbursement paid to the lessee is recorded as revenue if management is satisfied that the remaining reserve is considered sufficient to cover future maintenance or repairs. During 2013, one of the two CF 34 8C1 engines from the Bombardier CRJ 700 ER aircraft completed a maintenance shop visit. As of December 31, 2013, the second CF 34 8C1 engine was undergoing a maintenance shop visit. The Fund did not recognize any revenue or any additional costs from this shop visit. The lease expires within 12 months; as such the maintenance reserve payable has been reclassified from non-current to current liabilities.

 

Cash is only collected for maintenance costs on the Fund's CRJ 700 ER aircraft.

 

Revenue Recognition

Revenue recognition

 

For finance leases, at inception date, the Fund records the total minimum lease payments receivable from the lessee, the estimated unguaranteed residual value of the equipment at lease termination, the initial direct costs related to the lease and the related unearned income. Unearned income represents the difference between the sum of the minimum lease payments receivable, plus the estimated unguaranteed residual value, minus the cost of the leased equipment. Unearned income is recognized as finance income over the term of the lease using the effective interest rate method.

 

For operating leases, rental income is recognized on a straight-line basis over the lease term.

 

Gains or losses from sales of leased and off lease equipment are recorded on a net basis in the Fund's Statements of Operations.

 

Certain of the Fund's leases contain provisions for late fees on past due rent. The Fund recognizes late fees as income when they become chargeable and collection is reasonably assured.

 

Allowance for Doubtful Accounts

Allowance for doubtful accounts

 

The Fund evaluates the collectability of its lease receivables by analyzing the counterparties' payment history, general credit worthiness and current economic trends. The Fund records an allowance when the analysis indicates that the probability of full collection is unlikely. No allowance was recorded as of December 31, 2013 and December 31, 2012.

 

Write offs

Write offs

 

The Fund takes write offs when it determines that a receivable is uncollectible and when all economically sensible means of recovery have been exhausted. No write offs were recorded for the years ended December 31, 2013 and 2012.