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Understanding the Importance of Documentation A company is evaluating a lease to determine whether it...

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Accounting

Understanding the Importance of Documentation A company is evaluating a lease to determine whether it would receive capital or operating treatment and concludes that it should be capitalized. However, company accountants realize that a similar lease contract, executed just two years ago, has been receiving operating lease treatment. The company is unable to locate documentation explaining the rationale for the earlier leases operating classification. Think through this issue. What should the company do? What lessons can the company learn from this?

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