Equipment Held for Operating Lease

6 Months Ended

Jun. 30, 2014

Equipment Held for Operating Lease [Abstract]

EQUIPMENT HELD FOR OPERATING LEASE

NOTE 6 – EQUIPMENT HELD FOR OPERATING LEASE

The Company measures long-lived assets to be leased at the lower of carrying amount or fair value, less associated costs to lease these assets. During the last quarter of 2013, the Company decided to lease the ESR equipment to a third party and negotiations took place last quarter of 2013 through March 2014.  In March 2014, the Company entered into an operating lease agreement with an eight-year term commencing April 1, 2014, with a third party, whereby the lessee leases the ESR equipment from the Company for quarterly lease payments of 1,450,000 RMB (including value-added tax, approximately $236,000 per quarter).  Accordingly, at June 30, 2014 and December 31, 2013, the ESR equipment has been reflected as equipment held for operating lease on the accompanying condensed consolidated balance sheets. At June 30, 2014 and December 31, 2013, the Company evaluated the ESR equipment for impairment. The Company compared the estimated fair values of the equipment to its carrying value with impairment indicators and recorded an impairment charge for the excess of carrying value over fair value. For the three and six months ended June 30, 2014 and 2013, the Company did not incur any impairment charge on ESR equipment.

Equipment held for operating lease is depreciated over its estimated useful life starting from the operating lease commencement date, April 1, 2014.  Rental payments are recorded as rental income over the lease term as earned. The related depreciation on the equipment held for operating lease is recognized as a reduction of rental income on a straight-line basis. For the three and six months ended June 30, 2014, the Company recorded rental income of $201,853 and recorded related depreciation on the equipment held for operating lease of $167,987, and are included in other income on the accompanying unaudited condensed consolidated statements of income and comprehensive income.