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Leasing Decision at Magnet Beauty Products, Inc Introduction In late August 2010, Janette Clark, the owner of Magnet Beauty Products, Inc., was evaluating the different leasing options she had for her stores. Two weeks earlier, she had asked David Cameron, a newly recruited accountant, to analyze the impact that the new accounting standard for leases would have on her business. Clark asked Cameron to analyze how the different leasing proposals she had received from her landlord would affect Magnet's financial statements. Cameron's analysis showed that, as a result of the forthcoming accounting changes the different leasing options would have very different impact on the company's financial statements for years to come. She wondered how she should take these differences into account in making her final leasing decision. Magnet Beauty Products Inc. Magnet Beauty Products Inc. was a fast growing start-up selling premium hair, body and face care product. The company was set up in 2005 with the aim to utilize its extensive scientific resources for the creation of beneficial and safe products. Although Magnet started with a limited number of products being offered, it grew to offer a complete skin and hair care range, make-up, and sun care products, and herbal supplements. As of 2010, Magnet offered close to 100 innovative herbal products, employing 300 people and maintaining production facilities of 140 thousands square feet The firm differentiated itself from the competition by selling only products made from highly concentrated natural ingredients (Exhibit 1). Demand was particularly strong for products that had high concentration of exotic ingredients such as wild rose oil, a natural source of vitamin C, with significant repairing activity for fine lines and skin color disorders, and aloe, rich in vitamin E, Zinc and antioxidant enzymes, which enhance the immune system of the skin. Face products comprised 45% of total sales. Hair and body products equaled 21% and 19% of total sales respectively. Pharmaceutical and other products represented the rest 15% of the sales Magnet started its operations with one retail store in downtown Boston, and expanded to thirty two stores throughout Massachusetts by mid 2010. All stores were occupied under leasing arrangements. The company had leased all its stores from the same lessor, a large real estate company operating inMassachusetts. This gave Magnetthe advantage to negotiate the leasing arrangements collectively for all properties under one contract. Apart from the thirty-two stores