Retail Leases: A Student Case Study

• In Event: Teaching, Learning, and Curriculum II

Abstract

This case study exposes students to complex lease transactions, requiring research in the FASB Accounting Standards Codification, archived standards, and future standards (exposure drafts (ED)). In ascertaining that they followed proper authoritative provisions, parties to the lease should adopt some newer standards prospectively and others retrospectively . Students should thus ascertain how to (1) identify key facts needed to classify the given leases; (2) find the appropriate accounting literature; (3) record the leases at inception including payment allocations; (4) record new transactions under various leasing standards as new facts arise; and (5) report lease treatments if the most recent lease exposure draft becomes effective. This case remains relevant regardless of potential FASB/IASB convergence projects or other updated FASB standards because lease accounting requires using the rules in effect at the lease’s inception date to prepare currently issued and amended financial statements. However, the potential new lease standard, if adopted, should be applied retrospectively, unlike previous lease standards which were applied prospectively.

Authors

• Alan Reinstein, Wayne State University

• Natalie T Churyk, Northern Illinois University

• Lance Smith, Ernst & Young

• Gerald H. Lander, University of South Florida-St. Petersburg