One alleged advantage of leasing voiced in the past is that it kept liabilities off the balancesheet, thus making it possible for a firm to obtain more leverage than it otherwise could have. This raised the question of whether or not both the lease obligation and the asset involved should be capitalized and shown on the balance sheet. Discuss the positives and negatives of CAPITALIZING leases and the related leased assets.© BrainMass Inc. brainmass.com June 4, 2020, 1:34 am ad1c9bdddf
Capitalizing the leases has a number of benefits. First, it shows the total assets that the firm has the right to use, not just those that it has legal title to. Second, it shows the commitment into the future for the lease payments as liabilities, clearly reflecting the obligation to pay out funds in the future. This is a clearer picture of the firm's obligations than not reporting the liability and just having a footnote ...
Your tutorial is 296 words and four advantages of leasing and three disadvantages of leasing.