Response to Client Request Acc541

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While working on a consulting engagement, a supervisor in the team has given an assignment. The client is a regional trucking company. A new customer has approached the client with an opportunity that would require 120 trailers—20 more than the trucking company currently owns. The client is uncertain how long the relationship with the customer may last, but the deal has the potential for significant growth. The supervisor has asked a research to be conducted on leases and lease structure issues on the Financial Accounting Standards Board (FASB) website, in particular the current practice and thought related to direct financing, sales type, and operating leases. This paper is a memo addressed to the supervisor that summarizes the FASB research results. It recommends an approach that the client can use to evaluate and capitalize on this opportunity.


Date: MM/DD/YY
To: Team Supervisor
From:Team Consultant
Reference: Client - Regional Trucking Company

Subject:Research findings from FASB website on lease structure issues and recommendation to capitalize on new customer opportunity

At the outset, I would like to thank you for giving me the assignment referred above.

An opportunity from a new customer that has potential for significant growth for our client is indeed a welcome one. However the uncertainty with regards to how long the relationship with this new customer would last is only natural given the sluggishness of the current economy.

As you know, our client already owns 100 trailers and their present estimate shows that the new opportunity can be comfortably serviced by adding another 20 trailers to their current fleet. In the light of the above situation, your idea on leasing the additional trailers is thoughtful and strategic. As desired, I researched the Financial Accounting Standards Board (FASB) website for their Statement of Financial Accounting Standards (SFAS) No. 13 that deals...
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