•6.4. Notes receivable
Leases in which the Company transfers substantially all the risks and rewards incidental to the ownership of an asset to the lessees are classified as finance leases. Finance leases are recorded at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments.
Gross investment in finance leases include the total of future lease payments on finance leases (lease receivables), plus estimated residual amounts receivable. The difference between the lease receivables and the cost of the leased asset is recorded as unearned lease finance income and for presentation purposes, is deducted from the gross notes receivable. The Company takes security deposits on leases with the right to set off against the residual value of leased assets and for presentation purposes, these deposits along with prepaid lease rentals are deducted from gross notes receivable.