Lease Essay Example | Topics and Well Written Essays - 500 words

Lease - Essay Examplehe FSAB standards, the lease stipulation is for the use of the combustion turbine which could qualify as a groovy lease because it is an agreement for the use of a piece of property that could be classified as an asset. The first item to be assessed is the legal fees arising in connection with the lease, i.e., $500K to Stipe, Berry, Mills and Buck, together with $1 million in legal fees incurred by Goliath Co. These set downs would pop off under the category of external put downs that are not incurred on a sustained basis, but instead are a one-off expense. They do not fall under the category of a recurring expense and moreover, the total value of the payments as mentioned above, is unlikely to add up to a sum that is greater than 90% of the fair value of the leased asset, i.e., the combustion turbine. This expense can however be included in the Balance sheet of the Company as an establishment expense, which would fall under the category of a one-time expen se for setting up the lease. The advantage of this method is that it could contribute towards the payment of lower taxes to be paid on incomes touched from the leased property during the first year of lease.In regard to the second grooming, the lease is a capital lease that would fall under the category of a direct financing lease, because lease payments are creation made by a bank and Goliath Company which is leasing out the asset does not gain any share in the profits of Big Bear. The default provision in the lease requires a penalty payment from Big Bear if there is a material adverse change in its financial condition. Although this term is not specifically defined under the agreement, nevertheless the direct inference would be construed as any change in financial circumstances that lead to Big Bear cosmos unable to make its payments. The inclusion of a penalty payment is a fairly standard provision within a lease document, but the instigating factor is a default in the banks credit arrangement. This