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Capitalization of Leases that Do Not Meet the SFAS 13 Criteria

Under SFAS No. 13, leases that do not meet one of the four criteria for a capital lease are treated as operating leases.

Argue for the capitalization of leases that do not meet any of the SFAS 13 criteria for a capital lease. Your argument should take into consideration the conceptual framework definitions of assets and liabilities.

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Capitalization of Leases (SFAS No.13)

Under SFAS No. 13, leases that do not meet one of the four criteria for a capital lease are treated as operating leases. There should be a "capitalization of leases" that do not meet the SFAS No 13 criterion. According to Foundations of Financial Management by Block and Hurt, a long-term, non-cancellable lease has all the characteristics of a debt obligation. The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 13 B in accordance with the accounting profession for companies to fully divulge all information about ...

Solution Summary

This solution argues for the capitalization of leases that do not meet the SFAS 13 criteria.

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