Many companies use leases to acquire higher priced assets. Leasing is an important activity for many entities. Presently some leases are capitalized and some are treated as operating leases. Opponents of this method criticize the accounting treatment because the present models do not meet the needs of users of financial statements because they do not always provide a faithful representation of leasing transactions. One reason is that operating leases are not capitalized. The International Accounting Board has issued a Proposed Accounting Standards Update (topic 842) which proposes significate changes to lease accounting.
Write a five- to seven-page paper, formatted according to APA style as outlined in the Ashford Writing Center. Your paper should also cite five of the research links below and include an in text citation, a quote from the article. Section heading titles should be centered and in bold.
Address the following questions:
- Explain the present rules for evaluating a lease and whether it is capitalized or not.
- Explain the new lease accounting rules.
- What affect will these new rules have on the balance sheet, the income statement and the cash flow statement?
- What industries would be affected more than others?
- Explain the proposed new Type A and B lease and the differences.
- Explain the effects of the proposed lease standards would have on the following:
- Presentation on the financial statements.
- How assets and liabilities would be computed.
- The effect to lease expense due to “Front Loading.”
- Interest charges.
- Year-end reporting.
- Financial disclosure notes.
- Income taxes.