ACCOUNTING FOR LEASES
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Accounting has been described as "the language of business." Using accounting standards, financial statements such as the income statement, balance sheet and statements of cash flows can be analyzed and compared with the recognition that there are common terms and a common understanding as to how each of these documents are created. This commonality has not happened by accident; accounting standards have been established by the Financial Accounting Standards Board (FASB) and also by professional organizations. The government also imposes accounting guidelines and requirements; the recent Enron and WorldCom scandals resulted in the Sarbanes-Oxley Act that made these requirements even more stringent. While there is general agreement about how to account for assets and liabilities, questions have arisen when companies do not own a particular piece of equipment or capital outright, but instead lease it. There are standards in place today to handle lease obligations, but there have also been calls from stakeholders to change the requirements to more accurately reflect the effects that leases have on business. Given the recent accounting scandals and the "off balance sheet" financing used at Enron, it is not surprising that leases are receiving increased scrutiny. This research considers the special case of leases, the current model, and how modifications that might be made.When companies decide that they need a particular
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entaries that addressed specific issues while raising numerous others (Monson, 2001).
In 1976, the G4+1 was formed, an informal body that is composed of members from Canada, the United Kingdom, Australia and New Zealand as well as the FASB. This group has worked with the International Accounting Standards Committee to develop a new approach to leases that builds on SFAS 13 but that also addresses some of the issues that have arisen from its application and interpretation. Specifically, in 1996, the G4+1 sought to address the issue of accounting for the assets and liabilities that are associated with the rights and obligations of most operating lease contracts. Although ownership may not necessarily transfer to the lessee under these contracts, it is argued that the lessee nonetheless receives the benefit of the use of the leased propertyùclearly an assetùand at the same time, can identify long-term lease payments that could be construed as a liability. Thus the 1996 report called for all lessees holding leases with a period of more than one year to recognize the present value of future lease payments as a liability regardless of the lease period (Monson, 2001).
In 2000, the G4+1 revisited the issue of leases and concluded th
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Some common words found in the essay are:
Sarbanes-Oxley Act, Monson's G4+1, RECOMMENDATIONS Monson, Standards Committee, ANALYSIS Leases, Accounting Leases, Enron WorldCom, Tax Credit, Specifically G4+1, G4+1 Monson, asset approach, g4+1 approach, monson 2001, accounting leases, capital leases, financial statements, accounting standards, assets liabilities, lease period, balance sheet, retrieved 9 mar, 9 mar 2006, et al 2001, ryan et al, asset approach recognizes,
Approximate Word count = 3457
Approximate Pages = 14 (250 words per page)
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