Glossary of Terms

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FAS 13

Financial Accounting Standards No. 13 of the Financial Accounting Standards Board, which establishes standards for lessees' and lessors' accounting and reporting for leases. FAS 13 includes the characterization of a lease as an operating lease or capital lease for the lessee's purposes. A company's assets, liabilities and net income will differ depending on how it chooses to structure its leases. The provisions of FAS 13 derive from the view that a lease that transfers substantially all of the benefits and risks of ownership should be accounted for as the acquisition of an asset and the incurrence of an obligation by the lessee (a capital lease) and as a sale or financing by the lessor. Other leases should be accounted for as the rental of property (operating leases). (Courtesy www.elfaonline.org)

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