...ABC Lease Case ISSUE: Based on the ASC48,the agreement between ABC Inc. and Landlord LLC is operating lease. The cost of tenant improvements construction is treat as rental expense. BRIEF BACKGROUND OF COMPANY * ABC Inc. entered into an agreement with Landlord LLC to lease 40% of a building located in San Francisco. In addition, ABC Inc. wanted to make a improvements to the lease building to meet ABC's design specifications. The tenant improvements are for general purpose, but structural. The total estimated budget for tenant improvements is about $37 million * ABC and Landlord made a "work letter" show the details of the tenant improvements construction: * The lease start at 09/30/2010. The original lease term extends for 7 years from the inception date. In addition, the lease contains two 5-year renewal options, the first at 95% of fair value at the time of renewal. * The estimated budget for the TIs specified by ABC is approximately $37 million. The Landlord agreed to fund up to a total of $13 million for the TI construction as a tenant incentive. * The Landlord is overseeing the construction and directly pay all of the TI costs and will also invoice ABC for any amount over their agreed upon contribution amount. * Based on ABC’s design specification and agreed to deliver the facility in two phases, the first of which is targeted to be completed by Q3 2011 for approximately 250,000 square feet, and the second of which is targeted...
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...Individual: Communication Paper Suzanne Beal BCOM/230 October 08, 2012 Hank Parisi First I want to take this opportunity to welcome you to ABC Accounting, Inc. I am very confident that you will follow in my footsteps to lead this team to success. I want to take this time and give you a few words of wisdom that I have acquired through the years to help you make this transition go as smoothly as possible. Your main responsibility here at ABC Accounting is to maintain a cohesive working team. One of the more challenging responsibilities will be introducing new employees to the team members. Here are some of the barriers that you could encounter and some suggestions for some possible solutions. One of the most common barriers that you will come across is what I call the no it all’s. On occasion you have someone join the team who thinks they have the answers to everything. You need to be careful with this because you do not want to deter them from sharing their thoughts neither do you want them to steal the show. Always allow them the chance to give their input because sometimes their ideas are a welcomed change. Another barrier that you may come across is personality clashes. This can be tricky because you do not want to look as though you are taking sides so give each person a chance to speak and see if you can work out the differences together. You may also encounter those who are reserved and just listen without giving input...
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...Prabhakar Date: January 17th, 2011 Re: ABC Trucking Co. assignment results Message: These are the results of the assignment given to me by you last week regarding ABC Trucking company potential new client. I have done the required research on the Financial Accounting Standards Board (FASB) website regarding lease structures and current practices as it would relate to the specific issue at hand with ABC Trucking. All my research has shown that leasing would be an optimum option for the company to consider when leasing the extra trucks according to the requirement of the new potential client. Some of the benefits of leasing are that they will be able to finance all of the cost of the additional trucks without having to use of their own cash, they will be able to keep the trucks off their balance sheet if they choose an operating lease, and a lease will protect them when the trucks will became old and obsolete. Basically, there are two types of leases that ABC Trucking can choose from, below is a brief description and requirements of each: 1. Capital Lease: this is when the agreement for the lease is designed for the lessee acquires the assets and the end of the lease. From ABC Trucking’s perspective, they will be entering into a capital lease if it meets any one of the following four conditions as in paragraph 840-10-25-1 of the FASB Codification: (1) At the end of the lease, the lessee becomes the owner of the asset (2) The lease give lessee an choice to purchase...
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...Company Car Policy 1. Objective The new Company Car Policy has been formulated in order to introduce an employee friendly and easy to administer car scheme in the company with effect from -----------. With the introduction of this scheme all previous car schemes stand withdrawn. 2. Scope Employees in Grade M1 and above are entitled to participate in this scheme. These employees have been assigned Management Allowance / Car Kitty as part of their remuneration package. Their Management Allowance / Annual Car Kitty amount is given in the table included herein below. |(A) |(B) |(C) |(D) |(E) | | | | | | | |Grade |Car Kitty Amt. (p.a.)* |Mgmt. Allow. (p.m.) |Addnl. Car Kitty (p.a.)* |Max. Car Kitty Amt. (p.a.)* | | | | | | | | |Rs. |Rs. |Rs. |Rs. | |M5 |240,000 |20,000 |60,000 |300,000 | |M4 |195,000 |16,250 |45,000 |240,000 ...
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...bepress Legal Series Year Paper Enron and the Special Purpose Entity. Use or Abuse? The Real Problem - The Real Focus Neal F. Newman Texas Wesleyan Law School This working paper is hosted by The Berkeley Electronic Press (bepress) and may not be commercially reproduced without the permission of the copyright holder. http://law.bepress.com/expresso/eps/1165 Copyright c 2006 by the author. Enron and the Special Purpose Entity. Use or Abuse? The Real Problem - The Real Focus Abstract In December of 2001, Enron Corporation filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code; one of the largest corporate bankruptcy filings at that time. When the investigations commenced and the tangled Enron web was unraveled, it was discovered that Enron had perpetrated a very sophisticated form of accounting fraud through its repeated use of what are referred to as Special Purpose Entities (“SPEs”). In their most basic forms, SPEs are business entities formed for the purpose of conducting a well specified activity such as construction of a gas pipeline, or collection of a specific group of accounts receivable. However, because of their complex nature, SPEs can be used to manipulate a corporation’s financial results, which was the primary use for which Enron employed the SPE structure. As a result, the investment and financial community has cast a dark cloud over the special purpose entity, depicting the SPE as an inherently evil structure whose only purpose is to...
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...CHAPTER 4 ° SOCIAL AND CULTURAL ENVIRONMENTS 114B CASE 4-2 Disney Learns to "Act Local" on the Global Stage The Walt Disney Company, home to Mickey Mouse, Donald Duck, and other iconic characters, has a stellar reputation in many parts of the world for its family-friendly entertainment offerings. The company's parks and resorts division operates theme parks in five global locations, including a recent $1.8 billion park in Hong Kong. Disney's fabled studio entertainment unit has an illustrious history in both animation and live-action features. The Lion King, released in 1994, is the highest grossing animated film of all time. More recently, Disney has enjoyed massive hits with live-action features. These include Pirates of the Caribbean and its sequels as well as classic American fare such as the TV show High School Musical. However, despite high worldwide awareness levels of the Disney brand, as of 2006 only 25 percent of the company's revenues came from outside the United States. Historically, the Disney team has created products at its headquarters in Burbank, California, and then exported them to the rest of the world. Now, as the company targets China, India, South Korea, and other emerging markets, it is departing from its "one size fits all" approach. One factor driving the strategy change: the first-year visitor count in Hong Kong fell short of the target figure of 5.6 million people. This prompted company executives to step up efforts to educate the Chinese about...
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...Walt Disney Case Analysis Corporate Strategy The Disney brand is extremely well known, but most may not realize how diversified the company actually is. The company is made up of media networks, theme parks and resorts, studio entertainment, consumer products, and interactive media. Walt Disney Company’s corporate strategy involves three aspects; creating high-quality family content, exploiting technological innovations to make entertainment experiences more memorable, and internal expansion. Disney wants the whole family to be involved. Much of their success is due to targeting not just children, but the entire family. The movies and shows they release are done with family in mind. Theme parks and resorts, Disney Cruises, live performances and interactive media are all aimed at creating high quality family content. Disney acquired Pixar, Marvel, and Playdom in order to satisfy their second corporate strategy. The acquisition of Marvel and Pixar was intended to enhance Disney’s animation abilities to make experiences more memorable. Playdom gave the company new online gaming capacities that Disney hoped would help to improve its struggling interactive media division. UTV was acquired to facilitate its international expansion efforts. Disney’s international expansion strategy mainly focused on opportunities in emerging overseas markets. As of 2012 The Disney Channel was available in more than 100 countries and reached 75 percent of viewers in China and Russia. This was...
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...The purpose of this response is to determine the difference between direct finance leasing, sales-type leasing or an operating lease for Company ABC. To accomplish this, I will discuss a little background on all of the options and the advantages and disadvantages of a lease. This will aid company ABC in determining the best course of action for acquiring equipment in the future. First, what is a lease? “According to the Federal Accounting Standards Board (FASB), a lease is an agreement conveying the right to use property, plant, and equipment usually for a stated period of time” (Lee, 2003). Essentially a lease is an agreement between a lessee and lessor whereby the lessor “rents” their equipment to the lessee in return for a determined payment or series or payments over an agreed time period. SFAS No. 13 has specified criteria by which lease structures are classified into two basic types of leases, capital and operating leases. If all of the benefits and risk of ownership are transferred to the lessee, the FASB considers it to be a capital lease (Lee, 2003). The capital lease is then further classified in to a sales type lease and direct financing lease. A sales-type lease has a fair value amount different from its carrying amount (Lee, 2003). A sales-type lease can involve any type of property, plant and/or equipment. To be considered a capital lease it must do one of the following; (1) transfer of ownership to lessee, (2) option to purchase the property at a bargain price...
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...ABC Company (NAME OF COMPANY IN CASE) Date: September 24, 2012 (DATE ASSIGNMENT DUE) Prepared by: Really Smart Senior (YOUR NAME) Reviewed by: Professor Robert Elya ISSUE: Accounting for ABC’s sale-sublease-leaseback of solar equipment with customers and third party investors. (THIS TOPIC/ISSUE LINE SHOULD SUCCINCTLY DESCRIBE THE OVERALL ACCOUNTING ISSUE BEING ADDRESSED IN THE MEMO) BRIEF BACKGROUND OF COMPANY (THIS SECTION IS DESIGNED TO PUT THE ISSUE IN CONTEXT) THIS SECTION SHOULD BRIEFLY DESCRIBE THE IMPORTANT INFORMATION ABOUT THE COMPANY THAT A READER OF MEMO WOULD FIND HELPFUL IN EVALUATING THE ISSUE, INCLUDING NATURE OF ITS BUSINESS, RELATIVE SIZE (TO PROVIDE DEGREE OF MATERIALITY OF ISSUE TO THE COMPANY’S OVERALL FINANCIAL STATEMENTS),PUBLIC/PRIVATE (TO DETERMINE SEC CONSIDERATIONS), AND AN INTRODUCTION TO THE OVERALL QUESTION BEING ADDRESSED ABC Company is a publicly held alternative energy firm that develops and leases solar panel technology to residential, government and commercial markets. As of December 31st, 2011, ABC Company recognized $X billion in revenue for the sale, lease and installation of photovoltaic solar systems. Customers have the choice of either purchasing or leasing ABC’s solar panels. ABC Company is currently involved in a sale and leasing arrangement involving residents and third party investors. KEY CONSIDERATIONS INVOLVED IN THE ACCOUNTING QUESTIONS (IN THIS SECTION YOU WILL BREAKDOWN THE OVERALL ACCOUNTING QUESTION INTO...
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...behind ABC’s decision to close ABC shops (Battersby 2015) on the basis of strategic evaluation of both external and internal environment by applying analytical tools. The possible outcomes of this action will be critically assessed. Analysis 1. External As reported by Owens (2015), the main consideration of management is the disappointing profitability of ABC shop. Macro environment is evaluated by applying PEST and Porter’s Five Forces framework introduced by Jones (2015). PEST Political: Compared with industry-level, ABC group is facing more significant political impact at company specific level. On the one hand, the state-owned ABC benefits from large government funding as it enables ABC to carry out robust long-term strategy with clear income forecast. As discussed by McNair and Swift (2014), ABC has been acknowledged as producing good-quality news to serve public interest. On the other hand, being public means ABC suffers more political tension than private media. Especially when the Australia government announced to cut ABC funding by $ 254 million despite promising not to before the election (Hutchinson 2015), currently ABC is confronted with big challenge of delivering consistent service with less budget, keeping good relationship with successive government while remaining political-neutral in broadcasting, reminding people of its achievements and promoting public image to weather the storm. Overall, cutting funding gives ABC a hard time and enforces the company...
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...Mecca Street, P.O. Box 921951, Amman 11192, Jordan. Tel: 962-7-950-1220. E-mail: muhannad.atmeh@gju.edu.jo Received: May 22, 2012 doi:10.5539/ijbm.v7n18p49 Accepted: June 20, 2012 Online Published: September 16, 2012 URL: http://dx.doi.org/10.5539/ijbm.v7n18p49 Abstract Islamic banks use finance leases as a mode of financing, after incorporating major alterations in the structure of the contract in order to meet Shariah principles. In this case, the contract is called ‘Ijarah Muntahia Bittamleek’. As different structures might lead to different accounting results, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) issued Financial Accounting Standards to tackle the accounting treatment for such transactions. The paper criticised the accounting treatment offered by AAOIFI for violating the matching principle and lacking faithful representation. Suggested amendments for accounting treatments are also proposed. Keywords: Ijarah, lease, Islamic accounting, Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), financial reporting 1. Introduction Ijarah, also referred to as ‘Islamic lease’, is a contract where one party transfers the usufruct (Note 1) of an item to another party for a specified period, in exchange for a specified consideration (Asian-Oceanian...
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...Accounting for Leases Rae Girl ACC306 Intermediate Accounting II Professor Bill Wax August 21, 2015 Accounting for Leases Leasing is a commonly used financing vehicle in both personal and business arenas because the lease allows the parties to accomplish a sales-type transaction that benefits each without the commitment of an outright purchase on the part of the lessee. While the basic concept of a lease is simple, there are many complexities in theory and practice that have given rise to much discussion in the accounting profession. Still, leasing is a popular instrument and accountants must fully understand the methodology of decision-making and accounting for leases in order to properly reflect these transactions in a company’s financial statements. Simply defined, a lease is a contract between a lessor, the owner of an asset, and a lessee, the user of the asset. In other words, the lessor gives legal rights over the asset for a specified period of time to the lessee through a contractual agreement called a lease. The lessor retains legal ownership of the asset while the lessee has the right utilize the asset in business operations without having to purchase the asset outright. For this reason, in many instances, leases can be considered a financing vehicle. There are two basic lease classifications. The operating lease is a simple lease to account for because it is considered to be of the nature of a rental agreement. “The fundamental rights and responsibilities...
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...ACCT 202 - PRE-QUIZ #2 (Chapter 15) PROFESSOR FARINA Student: ___________________________________________________________________________ 1. Capital leases are agreements that are formulated outwardly as leases, but are installment purchases in substance. True False 2. The criterion of 75% of economic life for classifying a lease as a capital lease is consistent with the basic premise that most of the risks and rewards of ownership occur during the first 75% of an asset's life. True False 3. In accounting for operating leases, the lessor, rather than the lessee, will recognize depreciation on the leased asset. True False 4. In addition to the criteria that must be met by the lessee, the lessor must meet additional conditions for classification as a nonoperating lease to satisfy the realization principle. True False 5. When accounting for a nonoperating lease, the lessee records the leased asset at the present value of the minimum lease payments or the asset's fair value, whichever is lower. True False 6. If the lessee is expected to take ownership of a leased asset at the end of the lease term, the lessor must use an estimated residual value when calculating the lease payments necessary to achieve a desired rate of return. True False 7. A bargain purchase option is defined as the option of purchasing leased property at a price that is equal to the expected fair value of a leased asset. True False 8...
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...PROPERTY LAW Angela This situation is clear to see that Co- ownership is involved. There are two parties involved in this co- ownership; Brad and Angelina. We are looking to see the type of ownership they got into and at the end what will they be entitled to. There are two forms of co- ownership; Joint tenancy and Tenancy in common. The presumption of Joint tenancy is that the joint tenants own the entire property in question. The presumption of Tenancy in common is that the tenants own a share of the property in question. Joint tenancy will only be applicable if the test of the four unities is satisfied. Difference with tenancy in common is that you only need to satisfy the unity of possession. Unity of time means the tenants interest of the property must commence at the same time as other tenants. Possession means that the entire co – owned land is the tenants’ entitlement. Interest means interests held should be the same as the duration and time. Title means that tenants involved should be given a title from the same supplier. Again, we need to understand the sort of co-ownership we are dealing with here before advising the parties. There is a slight hope that we are dealing with joint tenancy as all four unities are present in this scenario. However, there are pros and cons of being a joint tenant, one of which is severance. One of the methods of...
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...Magnet Beauty leases all of its stores from the same lessor. They have determined that leasing makes more sense than buying properties. Describe the process that most companies undertake to make lease-versus-buy decisions. A company attempting to differentiate and decide between lease-versus-buy should first consider how long it plans to have the facility. This is an important point/factor when deciding between the two options because a company may opt to lease a facility, for instance, for a short time if the company is aware that it will move to a new location in the near future whereas a company will be more likely to purchase if the company knows that it will continue business in that location in the future. Another important factor is whether or not the company wishes to own the asset or simply use it for a certain period of time without being responsible for upkeep of the asset. We will see later that there is a distinction between capital and operating leases that touches on this concept. However, with purchasing of the asset there is no option of full ownership; as soon as you buy it you own. A company will also reflect on the concept of tax. If the asset is worth a lot of money then acquisition of this asset will have ramifications on taxable income. If you purchase the asset for instance then there will be less cash in the business therefore less taxable income at the end of the year whereas on the other hand if the asset is leased on an operating lease basis then the...
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