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Current state of leases (2012), pros, cons, improvements

Discuss the current state of accounting for leases, the strengths and weaknesses, and where improvement can be made. Be sure to discuss the off-balance sheet financing nature of operating leases.

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Currently, leases are classified as operating or capital (financing) leases. Operating leases are treat as a "true lease" meaning that you have temporary use of the asset but not a substantial array of the rights of ownership. Capital leases convey most of the rights and privileges of ownership and so are accounted for as purchases with financing rather than true leases. That is, the "rents" are treated as principle plus interest payments on a loan used to purchase the leased asset. The asset purchase price must often be computed ...

Solution Summary

Your tutorial is 327 words plus a reference and discusses operating versus capital / financing leases and off balance sheet treatment.

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