Reporting of leases in financial statements of lessee;

              Opinions
September, 1964
No. 5
of the
Accounting Principles Board •
American Institute of Certified Public Accountants 666 Fifth Avenue, New York, N. Y. 10019
Copyright 1964 by American Institute of Certified Public Accountants, Inc.
REPORTING OF LEASES IN FINANCIAL STATEMENTS OF LESSEE
INTRODUCTION
1. This Opinion sets forth the Board's views as to proper procedures or methods for implementing generally accepted accounting principles governing accounting for assets and liabilities and income and expense with respect to leases and sale and leasebacks. It supersedes Chapter 14 of Accounting Research Bulletin No. 43, "Disclosure of Long-Term Leases in Financial Statements of Lessees." This Opinion makes no distinction between leases of real property and leases of personal property. Because of the highly specialized problems involved, this Opinion does not apply to agreements concerning natural resources such as oil, gas, timber and mineral rights.
2. The two principal recommendations of Chapter 14 of Accounting Research Bulletin No. 43 were:
(1) ... where the rentals or other obligations under long-term leases are material in the circumstances, the committee is of the opinion that:
(a) disclosure should be made in financial statements or in notes thereto of:
(1) the amounts of annual rentals to be paid under such leases with some indication of the periods for which they are payable and
(2) any other important obligation assumed or guarantee made in connection therewith;
(b) the above information should be given not only in the year in which the transaction originates but also as long thereafter as the amounts involved are material; and
(c) in addition, in the year in which the transaction originates, there should be disclosure of the principal details of any im-portant sale-and-lease transaction.
(2) ... the committee is of the opinion that the facts relating to all such leases should be carefully considered and that, where it is
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