Current Generally Accepted Accounting Principles Do Not Require Operating Leases

question 73

Essay

Current generally accepted accounting principles do not require operating leases to be shown on the balance sheet.Consider the case of Barren Company.If the operating leases of Barren Company were added to the company's liabilities at December 31,2014,the company's current ratio would decline from 0.69 to 0.57 and total debt would increase from $239 million to $1,105 million.Significant changes would also occur in the return on assets since assets would be increased and the related increase in depreciation and interest expense would exceed the rent expense currently included in the company's income statement.
Required:

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Definitions:

Labor Standards

Regulations and policies establishing minimum requirements for working conditions, including wages, working hours, safety, and health protections.

Environmental Standards

Guidelines and criteria set to regulate activities and prevent harm to the environment, often involving emissions, waste management, and resource consumption.

Corporate Citizenship

Involves a company's responsibilities towards society and the environment, striving to contribute positively through sustainable practices, philanthropy, and ethical behavior.

Natural Resources

Raw materials and resources provided by nature that can be utilized for economic gain, such as minerals, forests, water, and arable land.