3 Pages essay please no copy paste. FASB’s Leasing Project: “Leases.” The status
ID: 2718164 • Letter: 3
Question
3 Pages essay please no copy paste. FASB’s Leasing Project: “Leases.” The status updates of both of these proposed changes in accounting can be found on the FASB’s wed site. Topic 1: Leases.
The FASB’s project on Leasing is very broad and complicated. Your paper, however, is limited to the differences between current GAAP and the new proposed accounting for lessees only. Your paper should be a high level discussion on the differences between the current definition and accounting for operating and capital leases compared to the proposed definition and accounting for Type A and Type B leases. This includes the asset and liabilities recognized under old and proposed GAAP and how such items as Future Minimum Lease Payments are computed (i.e. discount rate used, residual value considerations, etc.). Please give your view whether you believe the proposed changes are an improvement under existing GAAP relating the accounting for the lessee.
Explanation / Answer
Current GAAP on Leases focuses only upon the lessee and Lessor to provide information that whether the lease is a capital lease or operational lease. Though, it does not cause lessee to disclose the details of transactions related to lease. It does not provide accurate information to the users of financial statements such as investors, lenders and other agencies. Thus, accuracy in decision making by these stakeholders cannot be achieved. This is the primary cause for coming up with the proposed new standard w.r.t. lease. It focuses upon complete disclosure about transactions related to the lease as it will give more information to the user of accounting statement before they make any final decision.
It is a good proposal to make new standards that prevent lessee to hide any information that is necessary for other stakeholders.
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