Treatment of Leases Term Paper by Nicky

A look at different types of leases.
# 151255 | 787 words | 3 sources | APA | 2012 | US
Published on May 30, 2012 in Law (Business) , Law (Contract)


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Description:

This paper presents a legal analysis of different types of leases and how they should be used. The two types of leases that are discusses are the finance lease and the operating lease. Each is described at length and the situations in which each should be used is noted. Next, the discusses issues with R & D as they related to leases as well as legal problems encountered in R & D. This includes a look at the importance of international standards in
R & D. The paper concludes with an examination of the tax treatment of both operating leases and of R&D, which has resulted in inconsistency in financial statements.

From the Paper:

"This treatment of operating leases is considered by many to not be congruent with fundamental accounting principles. The intent is that public companies produce financial statements that allow the reader to understand the company's financial situation. There is concern that operating leases obfuscate the company's actual situation with respect to its liabilities. An operating lease only grants the lessee the right to use the asset (Damodar, n.d.). As such, the company does not assume the liabilities associated with the asset. However, the asset does represent a liability, insomuch as the lessee is obligated to make payments on the lease. These are considered, however, to be operating expenses. The problem that this creates is that many firms have a high rate of fixed expenses. These expenses are contractual obligations. Investors have little way to determining the extent to which the company's operating expenses are fixed obligations. This makes it difficult then for investors to determine the firm's short-term liquidity situation and long-term debt load."

Sample of Sources Used:

  • Lister, Roger. (2009). Classification and Treatment Leases. QFinance. Retrieved October 17, 2009 from http://www.qfinance.com/financial-regulation-best-practice/classification-and-treatment-of-leases?page=1
  • Damodar, A. (n.d.). Operating versus Capital Leases. New York University. Retrieved October 17, 2009 from http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AccPrimer/lease.htm
  • Oliver, J. (2003). Accounting and Tax Treatment of R&D: An Update. The CPA Journal. Retrieved October 17, 2009 from http://www.nysscpa.org/cpajournal/2003/0703/dept/d074603.htm

Cite this Term Paper:

APA Format

Treatment of Leases (2012, May 30) Retrieved November 29, 2020, from https://www.academon.com/term-paper/treatment-of-leases-151255/

MLA Format

"Treatment of Leases" 30 May 2012. Web. 29 November. 2020. <https://www.academon.com/term-paper/treatment-of-leases-151255/>

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