FASB Accounting CaseNew Standards for Capital Leases
Case Overview and Key Issues
Sable., a company located in San Fransico, CA, specializes in the manufacturing of heavy equipment and have different financing options for clients to own or lease the heavy equipment that they produce. The first option is to purchase the machinery in a traditional standard sale for a lump sum price of $135,000 in which the customers purchases the equipment outright. Another option is for a client to lease the equipment for a period of ten years and pay the lease payment on an annual basis. Sable has been charging $16,000 annually each year to lease the equipment during the ten-year period. However, both options are being effected by the economic conditions that loom in the external environment and some of the company's competitors are reducing their fees for similar equipment options and charging an average of $125,000. Once of its customers, Buildit, is a construction company in San Francisco that has recently entered into a lease for the regular price before the economic downtown took effect. The primary consideration in this case is how to deal with the accounting aspects of this transaction because the financial evaluation has changed due to the economic conditions in the external environment.
Recent Changes on FASB Lease Accounting
The Financial Accounting Standards Board (FASB) instituted new guidelines for lease accounting in early 2016. The new standards have been...
New Rules for Lease Accounting: The Controversy The Accounting Lease Controversy The Advantages of the new system Voices Against the New Lease Accounting Model The Accounting Lease Controversy The International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) jointly issued exposure drafts on August 17, 2010 proposing a new lease accounting paradigm. The EDs propose changes to simplify lease accounting and improve transparency. The new lease accounting model is based on
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