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
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Group In Re: Leases and Lease Structures A company wants information about leases and lease structures in the FASB codification required by the supervisor in response to the request of the client. The client is a regional trucking company. The company owns one hundred trailers 20 less than the requirement to take a new job proposal. The opportunity offers new growth, the doubt about the duration of the work is unclear and the client needs advice about whether to buy or lease the extra trailers
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ACCT 3303 | CAPITAL LEASE vs. OPERATING LEASE | | Dr. Serge Ryno ACCT 3303 December 2, 2011 Capital Lease vs. Operating Lease Firms often choose to lease long-term assets rather than buy them for a variety of reasons including the tax benefits that are greater to the lessor than the lessees and leases offer more flexibility in terms of adjusting to changes in technology and capacity needs. Lease payments create the same kind of obligation that interest payments on debt create, and have
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among manufacturers to provide lease financing actually replicates competition in the capital markets. Constrained by the risk-adjusted costs of capital and the pressures of competitors’ lease terms, the manufacturers’ proposals tend to cluster in a narrow range. Assessment of the various lease terms Discussion question 1: Why is Primus considering the lease of its factory-automation system to Avantjet? Discussion question 1: Why is Primus considering the lease of its factory-automation system
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operating and capital leases There are two primary types of leases: capital and operating. Capital leases are non-cancelable, and must meet at least one of the following requirements: the lease transfers ownership of the asset, the lease contains a bargain purchase option, the duration of the lease is 75% or more of the asset's expected economic life and/or the lease is worth at least 90% of the asset's value. An operating lease is one that meets none of the criteria. A capital lease is an example of
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The junior accountant used these GAAP standards for lease accounting. This is evident based on his statement, “Since the equipment reverts back to Lessor Inc., it is an operating lease.” (Deloitte, 2010) However, this company is an established British Company which means that it applies IFRS rules and regulations for preparing their financial statements. Under the IFRS standards, the company has finance lease instead of an operating lease. So, in short, the junior accountant’s analysis was incorrect
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Exercise: "E21-3, Lessee Entries; Capital Lease with Executory Costs and Unguaranteed Residual Value" Course: Date: Assume that on January 1, 2011, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Trevino Storage Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of $90,000 beginning on January 1, 2011.
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Liabilities - Effects Of Capital Vs. Operating Leases Capital Leases - Effects On: • Balance sheet - At the inception of a capital lease, the company leasing the equipment will record the equipment as an asset, and the company will also recognize a liability on the balance sheet, by an amount equal to the present value of the minimum lease payments. The discount rate used will be the lower of the following two rates: The lessor's (the rental company's) implied rate The lessee incremental
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interest rate, payment pattern, and amount). • Restrictions on deploying resources and pursuing business activities. • Ability and flexibility in pursuing further financing. • Obligations for working capital, debt to equity, and other financial figures. • Dilutive conversion features that liabilities are subject to. • Prohibitions on disbursements such as dividends. Obligations that arise from operating activities--examples are accounts payable, unearned revenue, advance payments, taxes payable
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ACCT 495 January 28, 2013 HW: E15-9,10,18 E 15-9 N = 6 $562,907 (5.32948) = 3,000,000 I =5% Lessor 1/1 Lease Receivables 3,000,000 Equipment Warehouse 3,000,000 6/30 Cash 562,907 Lease Receivables 562,907 12/31 Cash 562,907 Lease Receivables 441,052 Interest Revenue 121,855 Georgia- Atlantic Inc. Income Statement For the year ended 31, 2011 Non-Operating Revenue Interest Revenue 121,855 Operating Expense Depreciation
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