Case FASB Accounting Standards Codification Expected length: 2-3 pages (with double-spaced and 12-point font size) to answer each case. Expected format: - Page#1: Synopsis (e.g., summary of key issue, the related FASB code, and summary of your answers/conclusion) - Reaming pages: Detailed discussion, interpretation of the FASB code(s), complete analyses for the required questions, and conclusion. Grading rubric: Explanation of issues: Identify the key concept Analysis: Use the appropriate FASB Codification Logical conclusion: An answer is based on the update/interpretation/application of the FASB Codification Grammar and style Note: No tolerance for plagiarism including "cut & paste plagiarism." FASB Accounting Standards Codification Link: http://aaahq.org/Research/FASB-GARS Student Username: AAA52009 Password: utAE32W Useful materials https://www.youtube.com/watch?v=8TtSQfKaSUY https://www.youtube.com/watch?v=lLNPUDUWkSg https://www.youtube.com/watch?v=h4jbdda0cnM Page 2 of 3 Case 1 (Points 17.5) Salaur Company, a risky start-up, is evaluating a lease arrangement being offered by TSP Company for use of a standard computer system. The lease is non-cancelable, and in no case does Salaur receive title to the computers during or at the end of the lease term. TSP will lease the returned computers to other customers. The lease starts on January 1, 2020, with the first rental payment due on January 1, 2020. Additional information related to the lease and the underlying leased asset is as follows. Yearly rental $3,057.25 Lease term 3 years Estimated economic life 5 years Purchase option $3,000 at end of 3 years, which approximates fair value Renewal option 1 year at $1,500; no penalty for nonrenewal; standard renewal clause Fair value at commencement $10,000 Cost of asset to lessor $8,000 Residual value: Guaranteed 0 Unguaranteed $3,000 Lessors implicit rate (known by the lessee) 12% Estimated fair value at end of lease $3,000 Requirement 1. How Do the Main Provisions Differ from Current Generally Accepted Accounting Principles (GAAP) and Why Are They an Improvement? (See the accounting standards updated on February 2016 related to lease) Requirement 2. What fundamental quality of useful information is being addressed when a company like Salaur capitalizes all leases with terms of one year or longer?