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Capitalization of Leases that Do Not Meet the SFAS 13 Criteria

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

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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 ...

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