Write a memo explaining in simple terms the FASB's reasoning as it applies to Newton's situation. Also include potential concerns with the FASB’s reasoning.

Newton’s situation is that the potentially dangerous debt situation might lead to the violation of the debt covenant with their creditors and tarnish CTC’s creditworthiness, limiting it from obtaining future loans and could render it bankrupt. However, FASB’s reasoning offers that the limited access to credit because of the violation of debt covenants can be remedied by adjusting the financial records for operating lease obligations not recognized in the statement of the entity’s financial position under the pre-existing GAAP. The implication of this provision to the Newton’s is that their operating leases will not be treated as debts, meaning that the operating leases will not affect CTC’s financial health. This will prevent CTC from breaking the debt covenant and ensure its access to credit. Thus, the existing debt covenants are unlikely to impede CTC. The potential concerns with this reasoning include the provision that operating leases are considered operating liabilities and not debts, meaning that the amounts of operating leases do not influence the important ratios used in debt covenants. Another concern is that Topic 842 allows the extension of effective dates, which enables many entities’ existing loan agreements to expire before the entities report under Topic 842