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Unformatted text preview: Week 2 Assignment 2- 1 Week 2 Assignment 2 Michael Easterly Intermediate Accounting II ACC306 Prof. Lisbeth Bundli August 2, 2010 Week 2 Assignment 2- 2 Week 2 Assignment 2 There are a few issues that surround the topic of leases by companies. I t is important to remember that despite of the authorized form of the agreement, leases are accounted for as a either an operating lease (much like a rental agreement) or a capital lease (more of a purchase/sale). (Spiceland, Sepe, & Tomassini, 2007, pg. 712). One of the issues that arises from lease agreements is that it takes trained judgment to distinguish between types of leases, and sometimes managers t ry to structure leases as operating leases to avoid balance sheet effects (Spiceland, Sepe, & Tomassini, 2007, pg. 712). Managers may do this by mistake but it is more likely that it is on purpose since operating leases do not record assets or liabilities on the financial statements. This can be done because the cost is expensed the same time it financial statements....
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- Spring '10