Lease payments are shown as a tax deductible expense

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Unformatted text preview: statement. Anyone analyzing the firm’s income statement would probably recognize that an asset is being leased, although the amount and term of the lease would be unclear. The Financial Accounting Standards Board (FASB), in Standard No. 13, “Accounting for Leases,” requires explicit disclosure of financial (capital) lease obligations on the firm’s balance sheet. Such a lease must be shown as a capitalized lease, meaning that the present value of all its payments is included as an asset and corresponding liability on the firm’s balance sheet. An operating lease, on the other hand, need not be capitalized, but its basic features must be disclosed in a footnote to the financial statements. Standard No. 13, of course, establishes detailed guidelines to be used in capitalizing leases. Subsequent standards have further refined lease capitalization and disclosure procedures. CHAPTER 16 FOCUS ON e-FINANCE Logging-On for Leases Moving their lease application processes online has provided a solid advantage for computer equipment vendors. Customers of Auspex Systems, Inc., a manufacturer of computer...
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