SAT Case 13-1-Power Point-2010

SAT Case 13-1-Power Point-2010 - Debate 13-1 OperatingLease...

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Debate 13-1
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Operating Lease Essentially a rental agreement between the lessor and the lessee Typically is cancellable by the lessee without a significant penalty Shown on the income statement as an operating expense
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Capital Lease Long-term lease that is “in substance” an installment purchase. Lease that “transfers substantially all of the benefits and risks of the ownership of property.” (SFAS No. 13) Asset and corresponding liability shown on the balance sheet. Depreciation is taken by lessee.
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SFAS No. 13 FASB states that if any of the following requirements are met, then the lease should be treated as a capital lease: the life of the lease exceeds 75% of the life of the asset the ownership of the asset is effectively transferred to the lessee at the end of the lease period bargain purchase option available at the end of the lease term present value of lease payments exceeds 90% of the fair value of the asset
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SAT Case 13-1-Power Point-2010 - Debate 13-1 OperatingLease...

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