There are a number of options available to the client whose company does not own enough assets to carry out a contract for its customer. These options, according to the Financial Accounting Standards Board, involve leasing the twenty trucks from a lessor. The process of leasing is a dais that transfers the rights to use tangible assets for a specified period. The board stipulates definition and terms of leasing of the asset for the company. The company seeking to obtain twenty trucks is the lessee and will consider these options depending on the time of contract or relationship with the customer, interest in profits or advertisement or even acquisition of the trucks at the end of the lease term. Should the company wish to acquire the trucks for permanent ownership, then the capital lease is its best option (IASB & the US Financial Accounting Standards Board, 2009) . The capital lease will allow the company to pay for the trucks for a certain period after which it can own the trucks on its last payment. This might not be necessary, however if the company does not carry out more businesses that require over a hundred trucks. Eventually, the trucks might become a burden to the company if they do not bring in returns to it. For this reason, the company might want to consider direct financing, sales or operating leases (Financial Accounting Standards Board of the Financial Accounting Foundation, 1980) .
A sales type lease permits the lessor to make profits or loss and encourages them to advertise their products or services and create a good relationship with the lessee or potential customers. This is the ideal lease for the truck company as it stands the chance to obtain the trucks at affordable prices and create a good relationship with the lessor (IASB & the US Financial Accounting Standards Board, 2009) . The lessor attempts to retain customers and is therefore inclined to offer very reasonable and affordable rates for the lessee. Furthermore, the lessee is assured of business in the future in case the company has a similar customer. If the lessor decides to charge the equivalent amount on the lessee and makes neither profit, then it is considered to be a direct financing lease. The price is also normally equivalent to the carrying amount in this case (IASB & the US Financial Accounting Standards Board, 2009) .
Delegate your assignment to our experts and they will do the rest.
An operating lease is one that does not allow application of additional criteria. It also does not allow transfer of ownership from the lessor to the lessee. The two additional criteria are that important uncertainties should not surround the costs that are not reimbursable by the lessor to the lessee. Such has to be during the lease while the second is that lease payment collectability by the lessor ought to be reasonably foreseeable. Both the direct financing and leveraged lease meet the two additional criteria (Financial Accounting Standards Board of the Financial Accounting Foundation, 1980) . While all these leases bear rental payments, the operating lease does not bear the risks of property ownership. All types of leases take into consideration rental payments, the projected economic life of the asset, bargain price option, ownership and fair value. The lessee maintains ownership of the asset during the lease period except in the capital or purchase lease where ownership transfers to the lessee. Furthermore, the various types or leases are also determined by the percentage of the projected economic life of the asset that becomes the lease period. Given that the company does not know how long the relationship will last with the new customer, it is important that they obtain a lease that is open to the bargain option. In this way, they are able to bargain a lower price should the period be shorter and an extension where the customer requires extended service (IASB & the US Financial Accounting Standards Board, 2009) .
In the event that the period of service to the new customer is shorter than expected and the lease extends into the future, the company may create a sublease. The sublease allows the lessee to become the lessor to yet another lessee. However, the company must be sure to return the trucks to the initial lessor by the end of the first lease agreement period. The benefits arising from lease agreements are a convenience since companies may not want to acquire extra assets due to the cost of servicing and maintain them, then leases offer a wonderful opportunity to use and return the asset to the lessor. The lessee also benefits from appreciation and other economic doles that arise during the lease period. However, they also bear the fluctuations in value and losses arising from the same in the course of the lease (Financial Accounting Standards Board of the Financial Accounting Foundation, 1980) .
The company may opt to lease from the government or a private lessor as it deems convenient. Nevertheless, either of these parties must honor the terms of the lease. In the event that the terms are violated, it may be cancelled or pursued in a court of law. During the period of the lease by the company, it must take care of certain repairs while the lessor remains in charge of others. The company may not rebrand the trucks or change the appearance of the same unless the lessor agrees to such an act (IASB & the US Financial Accounting Standards Board, 2009) .
References
IASB and the US Financial Accounting Standards Board (2009). Leases, prliminary viewsI: discussion paper, DP/2009/1 ; comments to be received by 17 July 2009. Retrieved from https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&cad=rja&uact=8&ved=0ahUKEwih_8uJ6PLMAhUH1BoKHbycAzsQFghXMAk&url=http%3A%2F%2Flink.lib.umanitoba.ca%2Fportal%2FLeases-preliminary-views--comments-to-be%2F3Uz8aMz9sUE%2F&usg=AFQjCNGbVPWAbQvO9uTMRr4xwxhicrb6aQ&sig2=JcRldu8P9WMrJ8USHB1gTw
Financial Accounting Standards Board of the Financial Accounting Foundation. (1980). Accounting for Leases: FASB Statement No. 13 as Amended and Interpreted Through May 1980 : Incorporating Statements 13, 17, 22, 23, 26, 27, 28 & 29, and Interpretations 19, 21, 23, 24, 26 & 27. New York: John Wiley & Sons.
