From the course: Accounting Foundations: Leases
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How can I get around the new rule?
From the course: Accounting Foundations: Leases
How can I get around the new rule?
- When a new accounting rule comes out accountants love the challenge of picking apart the details of the new rule to figure out how to apply rule to make their company look as good as possible. For example, when the old Lease Accounting Standard was released in 1976, accountants figured out that the 75% Useful Life Provision and the 90% Value of Payments Provision could be managed to make sure that leases could be classified as off-balance sheet operating leases. Well the new Lease Accounting Standard now puts all leases on the balance sheet and these loopholes can no longer be used. In fact this was the key driving factor behind adoption of the new rule. So now all leases must be reported on the balance sheet, no exceptions! No loopholes! The Accounting Standard setters have completely stymied the efforts of accountants to use leases as a form of off-balance sheet financing. All, no exceptions, no loopholes, hhm well not quite. Let me tell you about the…
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