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Case study 786: Accounting for Leases: Build-A-Bear Workshop 54 a. Leasing assets provides many advantages over buying assets, including financing one hundred percent of the cost at a fixed rate. Leasing assets also protects the company from obsolescence of assets and provides the company with flexibility regarding the asset. Leases are also less costly to finance than purchasing assets, and leases often have tax benefits that purchases do not have. For some leases, companies can also do off-balance-sheet financing, which is advantageous in some cases. b. Operating lease - This is a lease with a term shorter than the useful life of the asset. These leases do not meet the four criteria used to define a capital lease. In this case, the lessees are not effectively purchasing the use of the asset for its useful life. Capital lease - This is a lease with a term relatively similar to the useful life of the asset. These leases meet the four criteria that define a capital lease. The lessees are essentially purchasing the use of the asset for the majority of its useful life. The four criteria are as follows: 1. Transfers ownership of the property to the lessee. 2. Contains a bargain purchase option. 3. Is equal to seventy-five percent or more of the estimated economic life of the leased property. 4. The present value of the minimum lease payments equals or exceeds ninety percent of the fair value of the leased property. 55 Direct-financing lease - This is a lease where the cost of the asset equals the fair value of the asset, and interest revenue is the only revenue earned on the lease. Sales-type lease - This is a lease where the sales price of the asset is not equal to the fair value of the asset. The lessor earns interest revenue as well as an additional profit from the lease. c. Different types of leases are accounted for differently because the leased asset can be treated differently based on the time of the lease. For a capital lease, the lessee is effectively using the asset for most of its useful life while an operating lease is typically for less than the useful life of the asset. Lessees with capital leases own the majority of the use of the asset, which is not the case with operating leases. d. Build-A-Bear's hypothetical lease i. This lease is an operating lease because it does not meet any of the four criteria to be considered a capital lease. ii. iii. For year one: For years two through five: Lease expense $100,000 Deferred rent 25,000 Cash 125,000 Lease expense $100,000 Cash $100,000 Lease expense $100,000 Deferred rent $100,000 56 e. Build-A-Bear's operating leases i. Rent expense for fiscal year 2009 was $46.8 million. ii. This expense appears in selling, general, and administrative expenses on the income statement. f. Build-A-Bear's operating leases i. ii. iii. iv. v. g. If Build-A-Bear considers its leases as operating leases, they appear on the income statement as expenses, which lowers their net income. This lower net income results in paying less in taxes to the government. Period Lease payment Present value factor Present value of the payment Discount rate 1 $50,651 0.9346 $47,337.38 7% 2 $47,107 0.8734 $41,145.08 3 $42,345 0.8163 $34,566.13 4 $35,469 0.7629 $27,059.13 5 $31,319 0.7130 $22,330.01 6 $25,229 0.6663 $16,811.15 7 $25,229 0.6227 $15,711.35 8 $25,229 0.5820 $14,683.51 $219,644

Question 61 I want to ask something about cerebrovascular accident (CVA). Can you please tell me how we can rapidly pinpoint the exact anatomical site of the neurological deficit using physical findings in the emergency room? Question 62 Why do you treat dissection of the carotid artery with an anticoagulant in the acute management of stroke secondary to dissection? To me this seems paradoxical as it would increase the severity of dissection. Question 63 Last week, in a neurology viva, I was asked about the indications for heparinization in patients with a stroke. I want to know when I can stop heparin and what test I should use for assessing its therapeutic range. Question 64 Has heparin a role in the management of acute ischaemic stroke not accompanied by atrial fibrillation? Question 65 1. In the treatment of a stroke, does low-molecular-weight heparin (LMWH) have an advantage over heparin? 2. In an ischaemic stroke in evolution, for how long should heparin be administered? Question 66 Can streptokinase be used in acute cerebral infarction and, if so, what is the dose? Question 67 There seems now to be a consensus about starting aspirin therapy in acute ischaemic strokes as early as possible. Why has this changed from 21 Neurological disease 228 past recommendations to avoid aspirin early (during the first 48 hours) during the ischaemic stroke on the pretext that it could convert an ischaemic infarct into a haemorrhagic one, thus increasing the dangers of complications like cerebral oedema and raised intracranial pressure? If both opinions are based on clinical trials, what is the significance of the much hyped 'evidence-based medicine'? Question 68 I understand that a loading dose of clopidogrel 600-900 mg can be given to ischaemic stroke in evolution and can stop the evolving deficit. Would you agree? Question 69 Is there any rationale for giving patients with recurrent strokes a combination of aspirin and anticoagulant? Question 70 1. Does a dipyridamol-aspirin combination have any superiority over aspirin alone in the secondary prevention of a stroke? 2. Is an aspirin plus anticoagulant combination superior to a dipyridamol aspirin combination in the treatment of recurrent ischaemic stroke not controlled by aspirin alone?