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Assume That You Are Currently Negotiating a Lease Transaction in the Role

Question 49

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Assume that you are currently negotiating a lease transaction in the role of the lessee. Discuss whether you would rather structure the lease as an operating lease or a capital lease and why. In addition, provide the conditions that would require that the lease be accounted for as a capital lease.
Normally most managers would probably want to structure a lessee transaction as an operating lease in order to keep the asset and liability off the balance sheet. In addition, if structured properly an operating lease would shift expense recognition later, as opposed to earlier with a capital lease.

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