Equipment-as-a-Service
Equipment-as-a-Service (EaaS) is a business model in which a provider places equipment at the customer's site, maintains it, and charges a recurring fee – often combined with a usage component such as hours run or units produced – instead of selling the equipment outright.
Billing
Explanation
EaaS is a commercial term, not an accounting category. One EaaS contract can contain several units of account:
• A lease, if the contract conveys the right to control the use of an identified asset. Under ASC 842 and IFRS 16, this depends on whether the asset is identified, whether the provider has a substantive substitution right, and whether the customer obtains substantially all economic benefits and directs the asset's use. If the provider operates the asset and the customer only receives an output, the arrangement may be a service.
• Services, such as maintenance, monitoring, or consumables, accounted for under ASC 606 / IFRS 15.
• Usage fees, which for lessors are variable payments that are not based on an index or rate. They are recognized when the usage occurs and allocated to the lease and non-lease components.
Why It Matters
Lease classification decides whether the equipment stays in fixed assets or is derecognized, and the component split drives recognition patterns. In SAP, equipment and service contracts, usage billing, and SAP Revenue Accounting and Reporting (RAR) have to work together. SAP RAR can hold the lessor lease component and the service components in one revenue accounting contract.
Related Terms
Embedded Lease · Usage-Based Billing · Variable Lease Payments · Recurring Billing · SAP Service Management · Operating Lease · Lease and Non-Lease Components
Related Articles
• Leases in Bundled Contracts: Separating Lease and Non-Lease Components
• Subscription and Usage-Based Billing: Key Design Decisions
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