...Accounting for Leases under IFRS Lease classification A lease is an agreement between lessor and lessee, whereby the lessor passes to the lessee the right to use an asset for an agreed period of time in return for a payment or series of payments. Under IFRS IAS (17) Leases we recognize two types of leases, finance and operating: IAS 17, paragraph 8: “A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.” IFRS further, in paragraphs 10 and 11, provides examples and indicators that “individually or in combination” would serve as criteria to classify a lease as finance lease. IAS 17, paragraph 10: “Whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than the form of the contract. Examples of situations that individually or in combination would normally lead to a lease being classified as a finance lease are: (a) the lease transfers ownership of the asset to the lessee by the end of the lease term; (b) the lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised; (c) the lease term is for the major part of the economic...
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...Group 4 Acct 495-01 Case 11-6 Lessee Ltd. Lessee Ltd. (a British company that applies IFRSs) and Lessor Inc. had a lease agreement starting on January 1, 2007 which Lessee Ltd. rents equipment from Lessor Inc. for three years. The remaining useful life of the equipment is four years. The fair value of the equipment is $265,000. At the end of the lease term, Lessee Ltd. has guaranteed $20,000 as the residual value. The agreement contains no purchase or renewal options, which means at the end of the lease term, Lessee Ltd. needs to return this equipment to Lessor Inc. in original condition. According to the agreement, Lessee Ltd. needs to make lease payments of $100,000 to Lessor Inc. each year. Also, Lessee Ltd. is responsible for other expenses like insurance, tax and maintenance that cost $2,000 per year. The lessee’s incremental borrowing rate is 11% and Lessor’s implicit rate is 10%. Two accountants of Lessee Ltd. analyzed the assets of the lease. For the present value of lease obligation, if using the implicit rate in the lease (10%), the residual value would be $15,026 and the present value of annual payment would be $248,690. If using the incremental borrowing rate (11%), the residual value would be $14,624 and present value of annual payment would be $244,370. But on the computations of lease payments, the junior and senior accountant used two different ways. The junior accountant defined it is an operating lease and simply added lease expense and insurance expense...
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...Group 4 Case 11-6 Lessee Ltd. Lessee Ltd. (a British company that applies IFRSs) and Lessor Inc. had a lease agreement starting on January 1, 2007 which Lessee Ltd. rents equipment from Lessor Inc. for three years. The remaining useful life of the equipment is four years. The fair value of the equipment is $265,000. At the end of the lease term, Lessee Ltd. has guaranteed $20,000 as the residual value. The agreement contains no purchase or renewal options, which means at the end of the lease term, Lessee Ltd. needs to return this equipment to Lessor Inc. in original condition. According to the agreement, Lessee Ltd. needs to make lease payments of $100,000 to Lessor Inc. each year. Also, Lessee Ltd. is responsible for other expenses like insurance, tax and maintenance that cost $2,000 per year. The lessee’s incremental borrowing rate is 11% and Lessor’s implicit rate is 10%. Two accountants of Lessee Ltd. analyzed the assets of the lease. For the present value of lease obligation, if using the implicit rate in the lease (10%), the residual value would be $15,026 and the present value of annual payment would be $248,690. If using the incremental borrowing rate (11%), the residual value would be $14,624 and present value of annual payment would be $244,370. But on the computations of lease payments, the junior and senior accountant used two different ways. The junior accountant defined it is an operating lease and simply added lease expense and insurance expense together...
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...Patrick Killeavy 6/4/2015 ACCT 7116 Lessee Ltd. INTRODUCTION: Lessee Ltd. is a British company that applies IFRS for financial reporting purposes. On January 1, 2013, Lessee Ltd. leased equipment from Lessor Inc. The lease term covers a period of three years and reverts back to the lessor at the end of three years. The lease costs consist of $100,000 annual rental payments as well as $2000 of annual expenses that relate to insurance, maintenance, and taxes. The equipment has a 4 year useful life, $265,000 fair value, $20,000 guaranteed residual value, and $2000 salvage value. According to IFRS IAS 17, a lease can either be classified as a finance lease or as an operating lease. Lessee Ltd. has several concerns about the classification of the lease and whether to use the 10% implicit rate in the lease or the 11% incremental borrowing rate. As a result, both a junior and senior accountant of Lessee Ltd. provided an analysis discussing whether the lease was an operating or capital lease and each prepared the applicable journal entries. Was the junior accountant's analysis correct?: According to the junior accountant, the lease should be classified as an operating lease because the equipment reverts back to the lessor. The accountant believed that the proper annual journal entry consists of debiting legal expense of $100,000, insurance expense of $2000, and crediting cash of $102,000. According to IFRS IAS 17.10 "Whether a lease is a finance lease or...
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...Imamuddin W/O. Mr. Abu H. Imamuddin, of House no. 50, Road no. 10/A, Dhanmondi, Dhaka 1209, Bangladesh. Hereinafter referred as the Lessor (which expression shall mean and include their nominees, representatives, assigns, successors and legal representatives) of the one part. And Heidelberg Cement Bangladesh Ltd., Red Crescent Concord Tower, 17, Mohakhali CA [4-5h Floor] Dhaka, Hereinafter called the Lessees (which expression shall mean and include its successors, assigns, nominees, officers and legal representatives) of the other part. And Whereas the Lessor owns and is in possession of the Apartment 3B, of Plot no.37, Raod no. 123, Gulshan Residential Area, Dhaka, next to Gulshan Lake. And Whereas the Lessee has applied to the Lessor for the lease of Furniture, Fitting and Fixtures of the same apartment for residential accommodation. Lessor agreed to grant the lease of those items fully described in the Schedule referred as the List of Furniture, Fitting and Fixture. Now it is hereby agreed between the parties hereto as follows: 1. In consideration of the rent hereinafter referred to and other conditions herein contained, the Lessor agrees to let and the Lessee agrees to take on lease the same apartment on monthly rental basis from 15 August 2004 for a period of three years expiring on 14 August 2007. 2. The Lease may be extended under such terms and conditions and may be renewed for such period as may be agreed between the parties. Either party with three months...
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...as: an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. 11.2 We should capitalise a lease transaction (meaning that the leased asset and lease liability will be placed on the statement of financial position) when substantially all the risks and rewards of ownership pass to the lessee, and the lease payments are deemed to be material. AASB 117 describes the risks and rewards of ownership as follows: Risks include the possibilities of losses from idle capacity or technological obsolescence and of variations in return because of changing economic conditions. Rewards may be represented by the expectation of profitable operation over the asset’s economic life and of gain from appreciation in value or realisation of a residual value. AASB 117 dedicates a number of paragraphs (paragraphs 10 to 12) to assist in determining whether a lease is a finance lease or an operating lease. A finance lease is to be capitalised. These paragraphs state: 10. Whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than the form of the contract. Examples of situations that individually or in combination would normally lead to a lease being classified as a finance lease are: (a) the lease transfers ownership of the asset to the lessee by the end of the lease term; (b) the lessee has the option to purchase the asset at a price that...
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...Background Lessee Ltd., a British company operating under IFRS, leased equipment from Lessor Inc. for a period of three years. Lease payments of $100,000 are paid annually by Lessee Ltd., as well as $2,000 of other expenses including insurance, taxes and maintenance. The lessee’s incremental borrowing rate is listed at 11%, and the lessor’s implicit rate is calculated at 10%. The equipment reverts back to the lessor at the termination of the lease. The equipment has a 4-year useful life and a fair value of $265,000. Additionally, the guaranteed residual value of the equipment is $20,000 and the expected salvage value is $2,000. Issue #1: How should Lessee Ltd.’s Lease Be Classified? International Accounting Standard 17.10 states five examples of situations that “individually or in combination would normally lead to a lease being classified as a finance lease.” Two of the statements are relevant in classifying the lease as a finance lease. IAS 17.10.c says that the lease term must be for the “major part of the economic life of the asset.” Since the lease term is three years and the useful life of the equipment is four years, the lease term is 75% of the useful life of the asset which would constitute as a “major part” of the economic life of the equipment. Additionally, per IAS 17.10.d “at the inception of the lease the present value of the minimum lease payments [should] amount to at least substantially all of the fair value of the leased asset.” The present value of...
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...2 History of GSPB * ------------------------------------------------- 3 Business in Bangladesh * ------------------------------------------------- 4 Mission Statement * ------------------------------------------------- 5 GSPB at a Glance * ------------------------------------------------- 6 Strength of GSPB * ------------------------------------------------- 7 Share Holding Structure * ------------------------------------------------- 8 List of Directors: * ------------------------------------------------- 9 BUSINESSES * ------------------------------------------------- * ------------------------------------------------- 9.0.1 Long/Mid-Term Finance * ------------------------------------------------- 9.0.2 Short Term Finance * ------------------------------------------------- 9.0.3 Real Estate Finance * ------------------------------------------------- 9.0.4 Corporate Finance * ------------------------------------------------- 9.0.5 Merchant Banking * ------------------------------------------------- 10 BOARD & MANAGEMENT * ------------------------------------------------- 11 KEY MANAGEMENTKEY * ------------------------------------------------- 12 MARKET ASPECT * ------------------------------------------------- 13 FUND MANAGEMENT & CREDIT STATUS * ------------------------------------------------- 14 Financial Performance of GSPB – at a glance: * ------------------------------------------------- ...
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...THE HONG KONG POLYTECHNIC UNIVERSITY AF5206 HONG KONG TAX FRAMEWORK Unit 14 – Anti-avoidance Provisions Coverage 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Tax avoidance and Tax evasion Principles of anti-avoidance rules Anti-avoidance provisions in IRO Section 61 Section 61A Doctrine of fiscal nullity Section 20 Section 61B Section 39E Section 9A (Type I service company arrangement) Type II service company arrangement Advance Ruling Tax planning and ethical issues Basic tax planning principles Basic techniques of tax planning 1 TAX AVOIDANCE AND TAX EVASION Tax avoidance - Attempt to obtain tax benefit (i.e. reduction, elimination or postponement of tax) by legal means Tax evasion - Failure on the part of taxpayer to supply full and correct information relevant to an assessment of tax because of deliberate attempt or negligence - An offence punishable by a fine and/or imprisonment 2 PRINCIPLES OF ANTI-AVOIDANCE RULES Westminster principle - “Every man is entitled if he can, to order his affairs so that tax attaching under the appropriate Act is less than it would otherwise be.” [Lord Tomlin in IRC v. Duke of Westminster (1935)] Choice principle - Established in Australian case law 2014 MPA_U14 Anti-avoidance.doc 1 August 2014 - Taxpayers are free to create favourable situations which will attract tax consequences for which the legislation specifically provides - If the legislature confers a choice on the taxpayer so as to whether or not...
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...Lease Finance Lease Finance • Lease is contract between the owner of the asset (Lessor) and the user (Lessee) of the asset, wherein the Lessor gives the right to use the asset to the Lessee for a consideration (Lease Rentals) over an agreed period of time (Lease period or tenure). • At the end of the lease period, the leased asset reverts back to the Lessor, unless the lease is renewed for another term. • Leasing separates the ‘Ownership’ and ‘Usage’ of the asset as two separate economic activities. Leasing 2 Leasing, Hire Purchase, Instalment Sale • Leasing: – Lessor retains the Ownership of the asset & claims the benefit of Depreciation. – Lessee claims the Lease Rentals as tax-deductible expense. • Hire Purchase: – Ownership passes to the Hirer (user) on payment of the last Instalment (on payment of Capital & Interest) and takes benefit of Depreciation and tax-deductibility of the Interest component of the Hire charges. • Instalment Sale: – The legal ownership passes as soon as the 1st instalment is paid. The balance amount is treated as a secured loan and Interest portion is Tax-deductible Leasing 3 Basic Types of Lease • On the basis of the extent to which the risks and rewards incidental to the ownership of the leased assets lie with the Lessor or the Lessee, lease can be classified as: Finance Lease Operating Lease Leasing 4 Finance (or Capital) Lease • Non-cancellable for a specified period called the PRIMARY LEASE Period- usually 5-8 years. • Leased Asset...
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...2 Accounting Standards Learning objectives After studying this chapter, you will be able to: ♦ ♦ 1. Understand the provisions of the Accounting Standards specified in the syllabus. Solve the practical problems based on application of Accounting Standards. Introduction Accounting Standards (ASs) are written policy documents issued by expert accounting body or by government or other regulatory body covering the aspects of recognition, measurement, presentation and disclosure of accounting transactions in the financial statements. The accounting standards aim at improving the quality of financial reporting by promoting comparability, consistency and transparency, in the interests of users of financial statements. Good financial reporting not only promotes healthy financial markets, it also helps to reduce the cost of capital because investors can have faith in financial reports and consequently perceive lesser risks. You must have already studied the concept, objectives, benefits and limitations, applicability and compliance of Accounting Standards, in detail, in Chapter 1 of “Accounting” Intermediate (IPC) Course Study Material – Group I. We shall discuss the Accounting Standards (specified in the syllabus) in this chapter taking individual standard in detail. 2. Overview 2.1 AS 4: Contingencies and Events Occurring After the Balance Sheet Date Accounting Standard 4 ‘Contingencies∗ and Events Occurring after the Balance Sheet Date’ covers accounting treatment of ∗ Pursuant...
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... | < 48,000 > | < 84,000> | | |E.A.T. | 280,000 | 112,000 | 196,000 | |÷ |No. of Ordinary Shares |5,000,000 |3,000,000 |4,000,000 | |( |E.P.S |5.60 |3.73 |4.90 | Implications: Existing shareholders would obtain the higher returns the more of the required $2,000,000 were to be raised by issuing equity. This situation usually arises when achieved E.B.I.T. is below the indifference point E.B.I.T., as is the case with D.T.C. Ltd....
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...Ratio-Analysis-of-Jamuna-Bank Report On Ratio Analysis of Jamuna Bank Submitted To: Mr.K.M.Zahidul Islam Senior Lecturer Faculty of Business and Economics Daffodil International University Submitted by: MD. Jilllur Rahman Khan ID. No: 041-18-243 Program: B.Com (Hon’s) Batch: 3rd Daffodil International University 102, Sukrabad, Mirpur Road Dhanmondi, Dhaka-1207 Submission Date: September 19, 2006 September 19, 2006 Mr. K.M. Zahidul Islam SeniorLecturer Department of Business and Economics Daffodil International University Shukrabad, Dhanmondi Dhaka-1205 Subject: Prayer for submission of Ratio Analysis on Jamuna Bank Limited. Dear Sir: I beg to state that I am a regular student of B.com (hon’s) of Daffodil International University. I am submitting this report on Jamuna Bank Limited as you give me a great chance to prepare a report on this prestigious bank. It can be said that by doing this kind of assignment I have learned a lot of excellent information about banking sector. To prepare this report I have shared my views and ideas with the executive of this bank. Now, I have a nice experience...
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...[pic] ASA Tower, 23/3 Bir Uttam A.N.M. Nuruzzaman Sarak, Shymoli,Dhaka. 1207. Internship Report On “Modes of Investment of IBBL” Submitted To Dr. Md. Abdul Hye Professor & Dean Faculty of Business ASA University Bangladesh (ASAUB) Submitted By Sheikh Refath Jessan ID. No: 091-12-0293 Section: ACT-6A Major: Accounting Batch: 6th Program: BBA ASA University Bangladesh (ASAUB) Date: December 30, 2012 December 30,2012 Dr. Md. Abdul Hye Professor & Dean, Faculty of Business ASA University Bangladesh (ASAUB). Dear Sir: SUBMISSION OF INTERNSHIP REPORT I have the pleasure to submit the internship report on ‘Modes of Investment of Islami Bank Bangladesh Limited (IBBL)’ for your kind perusal and evaluation. It is a matter of immense pleasure for me to have the opportunity to prepare internship report on, ‘Modes of Investment of Islami Bank Bangladesh Limited (IBBL)’. I am grateful to you for allowing me to carry out such work and necessary co-operation and assistance from you during my report. I believe that the knowledge and experiences acquired while conducting this study will help me in many ways and the readers as well in future. I have tried my best to accommodate my ideas and findings as specifically as you asked about within the time frame and resources available I would like to mention that there might be some errors in the report...
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...Internship Report Subject: Interrelation Between Products, Interest RATES & Terms Of Finance Internship Organization: United Leasing Company Limited 22 , Kazi Nazrul Islam Avenue, Dhaka Prepared for: Internship Supervisor Mr. Imran Rahman Associate Professor IBA, Univ. of Dhaka Prepared by Maruf Haider ZR 33, BBA 10th Institute of Business Administration University of Dhaka. June 25, 2006 June 25, 2006 Mr. G. M. Chowdhury Chairman Internship & Placement Program Institute of Business Administration University of Dhaka Dear Sir: I am glad to submit my Internship Report for the Internship Program (BBA 10th, 2006), herewith. I considered your remarks and instructions very carefully while preparing this report. I tried my level best to follow your schedule, format and discipline. I tried to comprehend all the areas related to this report. This has certainly enhanced my knowledge base with a practical orientation. Thank you for your consideration. Sincerely Yours, Maruf Haider ZR -33 , BBA 10th IBA Univ. of Dahaka Table of Contents Section 1 –Organization report 1.1 Background of ULC 1.2 Corporate Objective 1.3 Capital, Sponsors and Share Structure 1.4 Board of Directors 1.4.1 Executive Committee 1.5 Organizational Structure 1.5.1 Management 2.1 Lease Portfolio and Sector wise Exposure 2.2 Performance of ULC at a Glance 2.3 SWOT Analyses...
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