FedEx Corporation, the world's largest express transportation company, leases much of its aircraft, land, facilities, and equipment.
Question:
Deferred Gains
Gains on the sale and leaseback of aircraft and other property and equipment are deferred and amortized ratably over the life of the lease as a reduction of rent expense.
Required:
1. Why should companies defer gains from sale-leaseback arrangements?
2. Based on the information provided in the disclosure note, determine whether the leases in the leaseback portion of the arrangements are considered by FedEx to be capital leases or operating leases. Explain.
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Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
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