Discuss the issues the lease agreement raises from an ethical and financial reporting point of view.

Question

Question

Answer 1

Answer #1

As per latest accounting for lease arrangement, organisation are enjoying the right of outright ownership without showing any assets and liability in books of account. It creates a situation of off balance sheet item. And Operating leases are used by organisation as the form off balance sheet.
This practice of accounting for operating lease agreement may lead the organisation towards unethical and unfair financial reporting. Financial Accounting Standard Board (FASB) and International Accounting Standard Board (IASB) are continuously trying for ethicality and fairness of financial reporting to avoid scandale like Enron and other organisation.

Answer 2

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