Monday, November 5, 2012

Accounting for Leases

Advantages of leasing:

·        100% financing at fixed rates
·        Protection against obsolescence
·        Flexibility
·        Less costly financing
·        Tax advantages
·        Off-balance-sheet financing

Conceptual Nature of a Lease:

·        Do not capitalize any leased assets
·        Capitalize leases that are similar to installment purchases
·        Capitalize ass long-term leases
·        Capitalize firm leases where the penalty for nonperformance is substantial

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