Ey Leases

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Financial reporting developments A comprehensive guide

Lease accounting
Revised October 2011

To our clients and other friends
We are pleased to provide you with this updated edition of our Financial Reporting Developments publication, Lease accounting. This edition of our publication primarily has been updated from our prior edition to reflect updates to relevant accounting standards.
The classification of a lease for accounting purposes can have a significant impact on the financial position and earnings reported by either party to a lease transaction. The accounting guidance discussed in this publication affects entities engaged in leasing activities as either a lessee or lessor and requires both lessees and lessors to classify leases based on specified criteria. There is a high degree of complexity in accounting for lease transactions. The consequences of incorrectly assessing accounting requirements can be severe if the goal was to obtain off-balance sheet financing. Accordingly, it is important to carefully assess the propriety of a specific lease transaction prior to consummation.
For many companies, a lease transaction is an infrequent and significant event. This guide is designed to provide a summary, in one location, of the lease accounting rules. Companies that are involved in lease accounting transactions on a regular basis will be familiar with many of the issues described herein.
However, those companies as well as companies that only occasionally consider lease transactions often need the advice and assistance of professional advisors to evaluate the facts and circumstances that may be encountered in a particular transaction.
Ernst & Young professionals are prepared to help you identify and understand the issues related to lease accounting. In addition, our audit and tax professionals would be pleased to discuss with you any…...

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