Sacramento + Roseville Accountant for Capital Leasing Companies

Cook CPA Group

Stockholders, creditors, and private investors often need assurance that the financial statements accurately represent the true financial position of a company.

Your stockholders, creditors, or private investors have different levels of risk tolerance, so we provide three levels of assurance to meet your needs.

Audit – Highest Level of Assurance

An audit provides the highest level of assurance. An audit is a methodical review and objective examination of the financial statements, including the verification of specific information as determined by the auditor or as established by general practice.

Our work includes a review of internal controls, testing of selected transactions, and communication with third parties. Based on our findings, we issue a report on whether the financial statements are fairly stated and free of material misstatements.

An Audit allows you to…

  • Satisfy stakeholders such as employees, customers, suppliers and pressure groups, as well as the investing community, as to the credibility of published information.
  • Facilitate the payment of corporate tax, goods and services tax, and other taxes on-time and accurately, thereby avoiding interest, penalties, and investigations.
  • Comply with banking covenants.
  • Help deter and detect material fraud and error.
  • Facilitate the purchase and sale of businesses.

Here’s what you get…

You get the highest level of assurance because we go outside your company to obtain more information. Typically, we’ll have written communication with:

  • Your customers, to check outstanding receivable balances,
  • Your banks, to confirm cash or debt balances and terms,
  • Your vendors, to verify outstanding payable balances, and
  • Your attorneys, for information on pending or threatened legal action.

We also perform physical inspections by observing your inventory counting methods and perform test counts. We document and test each operating cycle, including sales and cash receipts, expenses and cash disbursements, and payroll. Our audit papers include a detailed work program to document the examinations and testing performed, as well as the client’s supporting work papers.

Audits Not Just for Public Entities

All public companies are required to have an annual audit, but some nonpublic entities must undergo an annual audit as well. These include local governments, not-for-profit agencies and other organizations receiving government grants.

Moreover, some financial institutions require audits of nonpublic companies based on the financing amount and/or the bank’s assessment of the company’s risk. Also, companies with absentee ownership (such as those owned by investment firms, or individuals who no longer run the business) may order audits as checks of their management teams.

Review – Limited Assurance

Less extensive than an audit, but more involved than a compilation, a review engagement consists primarily of analytical procedures we apply to the financial statements, and various inquiries we make of your company’s management team. If the financial statements or supporting information appear inconsistent or otherwise questionable, we may need to perform additional procedures.

A review doesn’t require us to study and evaluate your company’s internal controls or verify data with third parties or physically inspect assets. Rather, a review report expresses limited assurance in the form of the statement: “We are not aware of any material modifications” for the financial statements to be in conformity with the Generally Accepted Accounting Principles (GAAP). Reviewed financial statements must include all required footnotes and other disclosures.

Why might a business request a review engagement? It can be a good middle ground, providing the advantages of a CPA’s technical expertise without the work and expense of an audit.

Compilation – Lowest Level of Assurance

In compiling financial statements for a client, we present information that is the “representation of management” and expresses no opinion or assurance on the statements. Compilations don’t require inquiries of management or analytical procedures. Instead, we rely on our knowledge of accounting principles and a general understanding of your business.

Banks often require compilations from an independent CPA as part of their lending covenants.

Which Report Should You Use?

Each type of financial statement report may suit specific circumstances, depending on requirements from your client’s bank or other parties, as well as meet budgetary needs.

Understanding each report’s unique strengths and weaknesses can help you choose the most appropriate one. Please call if you have questions about which type of report is right for you.

Capital leasing is a field of business that is often complicated. This also holds for financial matters that involve capital leases. Fortunately, you do not have to figure out how to handle your capital leasing financial matters alone. Instead, you can work with an experienced Sacramento and Roseville accountant for capital leasing companies.

At the Cook CPA Group, we are committed to working with companies across California to help them with their complex financial problems. We understand that operating a capital leasing company can be stressful, and we are here to help alleviate your concerns for troublesome financial matters that may affect your company. To schedule a free consultation to discuss accounting for your capital leasing company, contact the Cook CPA Group at (916) 432-2218. You may also use our online submission form to schedule an appointment with one of our skilled accountants.

How Capital Leases Work in Sacramento + Roseville, CA

A capital lease is a type of contract that is executed for the purpose of allowing a renter temporary access to a certain asset. However, capital leases are economically treated as the owning of an asset when it comes to accounting. In some cases, a renter must book assets and liabilities linked to the capital lease, depending on the terms of the contract.

Understanding the accounting principles for capital leases can be difficult. However, the team of skilled accountants at the Cook CPA Group is here to help you understand how capital leases work.

Typically, capital leases are utilized as long-term leases that many companies will use to acquire vital equipment needed to operate their business. One of the greatest benefits of capital leasing is that a lessee is permitted to claim depreciation for leased equipment when normally business equipment will become useless after a number of years.

It is important that there are certain standards set by the Financial Accounting Standards Board (FASB) that determine whether the leasing a piece of business equipment will qualify as a capital lease. To be considered a capital lease, the lease must meet one of the following criteria:

  • The lessee of the business equipment will receive the title for the equipment after the conclusion of the lease
  • The capital lease has a provision that permits the lessee to buy the business equipment at below market value (possibly even for $1.00 in some contracts)
  • The term of the capital lease will last for longer than 75% of the useful life of the equipment
  • The lessee must submit payments that are above 90% of the fair market value of the business equipment

It is important to note that if your lease does not meet one of the above criteria, it will be assumed to be an operating lease. An operating lease is usually a lease that lasts for less than one year and is used to secure equipment like computers and other similar products. However, an operating lease does not provide the many benefits of having a capital lease.

We understand that accounting for capital leases can be problematic, and we are here to address your concerns. To learn more about accounting practices for capital leases, you should continue reading and speak with an experienced Sacramento and Roseville accountant for capital leasing companies.

Differences Between Capital Leases and Loans in Sacramento + Roseville

There are a number of similarities between capital leases and loans that could make a person become confused about how each one operates. Our firm can help you determine when an agreement to lease equipment should be considered as a loan and vice versa.

One big difference between capital leases and loans is that capital leases often include a provision known as a hell or high water clause. A hell or high water clause generally states that a lessee must make all lease payments on time regardless of any hardships or other issues that could affect timely payment. Additionally, if the lessee decides to make early payments on the capital lease, they will still be responsible for the rest of the remaining payments.

Unlike a loan, a capital lease typically states that the lessee must seek maintenance and other repairs of the equipment from the manufacturer of the equipment. This also means that the lessor will not be responsible for repairing faulty business equipment given to a lessee.

The Cook CPA Group is dedicated to providing accounting services to companies and individuals that are tailored to their unique needs. We know that capital leases are often a complex issue that is tedious to manage, and we are here to offer you the legal representation you deserve to handle your capital lease issues. Work with our firm today to address your accounting concerns.

Contact Our Experienced Sacramento + Roseville Accountant for Capital Leasing Companies Today

If you operate a capital leasing company and have accounting issues that you need to be resolved, you should consult with an experienced Sacramento and Roseville accountant for capital leasing companies. At the Cook CPA Group, our skilled team of accountants has worked on a variety of financial matters for capital leasing companies, and we would be pleased to offer you our services. To schedule a free consultation to discuss your accounting goals, contact the Cook CPA Group at (916) 432-2218. You may also reach us online to schedule your consultation.

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