Tag: Substance Over Lease

Past practices of business didn’t represented lease in financial statement. Technically, a business under lease agreement maintains an asset for a gain with scheduled payments (Stuebs & Thomas, 2011). The off-balance sheet nature of the transactions hides the involved liabilities hence misrepresentation of the financial performance is unavoidable. There are clear cash inflow and outflows resulting from the use of asset without its representation in financial statement a business cannot be held responsible for honoring the arrangement or at least hiding them for fraudulent representation of company’s financial position.