Session 9: Financial Reporting and Analysis: Inventories, Long-lived Assets, Income Taxes, and Non-current Liabilities
Reading 39: Non-current (Long-term) Liabilities
LOS i: Compare and contrast the disclosures relating to finance and operating leases.
Penguin Company is planning to lease a $5 million machine to produce goods for eventual sale. Penguin is able to structure the lease so as to classify it as either an operating or a finance lease. Advantages to Penguin of classifying this lease as an operating lease are least likely to include that:
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A) |
depreciation is not recorded. | |
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B) |
the lease is not reported as debt on Penguin's balance sheet, so leverage ratios are not increased. | |
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C) |
no disclosures of payments due under the lease are required. | |
Cash payments due under an operating lease must be disclosed in the notes to the financial statements for each of the following five years and in aggregate. Operating leases are simpler to account for and the often adverse ratio implications of offsetting increases in assets and liabilities are avoided. | 
发表于 2011-3-22 11:34
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