Discuss the motivation in terms of agency theory

Assignment Help Accounting Basics
Reference no: EM132720435

Case: Financial Statement Disclosure

Required: Current accounting for leases requires that certain leases be capitalized. For capital leases, an asset and the associated liability are recorded. Whether or not the lease is capitalized, the cash flows are the same. The rental payments are set by contract and are paid over time at equally spaced intervals.

1- If one of the objectives of financial reporting is to enable investors, creditors, and other users to project future cash flows, what difference does it make whether we report the lease as a liability or simply describe its terms in footnotes? Discuss.

2- When there are debt covenants that restrict a company's debt-to-equity ratio and when debt levels rise relative to equity, management may be motivated to structure leasing agreements so that they are not recorded as capital leases. Discuss this motivation in terms of agency theory.

Reference no: EM132720435

Questions Cloud

Describe the sources of the conflict : Illustrating workplace experience in which conflict arose. Describe the sources of the conflict.
Civil Service Reform Act : Explain what civil service in the United States looked like before 1978. Explain what civil service looks like since the Civil Service Reform Act of 1978.
Explain who are stakeholders with good examples : Explain who are stakeholders with good examples. Explain the two branches of stakeholder theory with good examples. The response must be typed.
Public policy as public relations : Explain how the policy was implemented and identify the target group the policy was intended for.
Discuss the motivation in terms of agency theory : Current accounting for leases requires that certain leases be capitalized. For capital leases, an asset and the associated liability are recorded.
Classical criminology : Choice Theory- Is to choose to engage in delinquent and criminal behavior after weighing the consequences and benefits of their actions
What is the amount of inventory : During its first month of business in May, On-a-roll, Inc., purchased 100 rolls of wallpaper at $14 per roll and sold 39 rolls for $42 per roll.
What is the probability that diameter of randomly selected : What is the probability that the diameter of a randomly selected pencil will be less than 0.285 inches? Find the value of z so the area to the right is 0.25
Prepare all journal entries required for Bridgeport Corp : Prepare all journal entries required for Bridgeport Corp. for the year ending December 31, 2020 relating to this contract

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd