Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 19, Problem 5Q
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To determine: The pros and cons of capitalizing leases and related assets.

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One alleged advantage of leasing voiced in the past was that it kept liabilities off the balancesheet, thus making it possible for a firm to obtain more leverage than it otherwisecould have. This raised the question of whether the lease obligation and the asset involvedshould be capitalized and shown on the balance sheet. Discuss the pros and cons of capitalizingleases and related assets.
One advantage of leasing voiced in the past is that it kept liabilities off the balance sheet, thus making it possible for a firm to obtain more leverage than itotherwise could have. This raised the question of whether or not both the leaseobligation and the asset involved should be capitalized and shown on the balance sheet. Discuss the pros and cons of capitalizing leases and related assets
What would be the advantages and disadvantages of leasing assets instead of owning them? How would the financial statements be different in a leasing situation (for both operating leases and finance leases) for the lessee? What about the lessor (including all of the types)? What disclosures should be made by lessees and lessors related to future lease payments?
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