Lease Case RK Corp, a publically traded NASDAQ company (symbol ARK), is a manufacturer of electrical automobiles. Based in Chicago, the company has been operating since 1996. The company sells their electric automobiles to auto manufacturers as well as the retail market on a worldwide basis. Its major clients are Ford, General Motors and Toyota. Ark has captured about 10 percent of the world market of the electrical automobile sales. Its stock sells at 25 US Dollars per share, and its 52-week price range is between 19.75 and 27.15 US Dollars, with a market cap of 10.6 billion dollars. Their financial statements presented below for the year ending December 31, 2011 has been prepared using GAAP (Tables 1 and Table 2). The controller would like to see the effect of IFRS treatment of leases on the financial statements, and you have been assigned this task. In particular, the controller would like to see the impact GAAP and IFRS differences have on balance sheet, income statement and selected financial ratios. The company would like to adapt IFRS by as early as next year as it is considering a new stock issue in the Tokyo Stock Exchange, which requires IFRS compliance. ADDITIONAL INFORMATION Ark entered into a lease on January 1, 2011 with the following terms: 1. Ark leased specialized machinery manufactured by the lessor, Bell Corp., which will enable Ark to manufacture their electric cars in a much more efficient manner. This machinery does not have a resale market and was made specifically for Ark to meet itsspecifications.
Lease Case
RK Corp, a publically traded NASDAQ company (symbol ARK), is a manufacturer of electrical automobiles. Based in Chicago, the company has been operating since 1996. The company sells their electric automobiles to auto manufacturers as well as the retail market on a worldwide basis. Its major clients are Ford, General Motors and Toyota. Ark has captured about 10 percent of the world market of the electrical automobile sales. Its stock sells at 25 US Dollars per share, and its 52-week price range is between 19.75 and 27.15 US Dollars, with a market cap of 10.6 billion dollars. Their financial statements presented below for the year ending December 31, 2011 has been prepared using GAAP (Tables 1 and Table 2). The controller would like to see the effect of IFRS treatment of leases on the financial statements, and you have been assigned this task. In particular, the controller would like to see the impact GAAP and IFRS differences have on
1. Ark leased specialized machinery manufactured by the lessor, Bell Corp., which will enable Ark to manufacture their electric cars in a much more efficient manner. This machinery does not have a resale market and was made specifically for Ark to meet itsspecifications.
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