operating leases under GAAP and IFRS. The accounting treatment is almost the same. Basically, an operating lease is a rental arrangement under which the lessor collects rents from the lessee for the use of the leased assets. For the lessee, operating leases only hit the income statement as the lessee recognizes rent expense over the lease term, while the lessor records rental income and depreciate the leased assets over the useful life. For this reason, companies prefer operating leases to make financial
Words: 293 - Pages: 2
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
Words: 284 - Pages: 2
com/2011/12/06/accounting-for-finance-leases-and-operating-leases/ Applicable Standard * IAS 17: Leases Classification of Leases * Finance leases (substantially all of the risks and rewards of ownership are transferred to the lessee) * Operating leases (otherwise) * Note that because Land has indefinite useful life, it is typically classified as an operating lease Calculating Total Finance Charge over Lease Term * Total minimum lease payments (cash) * - Cost of the asset
Words: 1001 - Pages: 5
Samantha Kozar Chapter 21 Summary ACCT 305-001 Spring 2013 The Leasing Environment Most companies and businesses today lease several different types of things especially businesses in the agriculture and construction sectors. A lease is a contractual agreement between two people; a lessor and a lessee. A lessor is one who owns the property, while a lessee is given rights to use their property for a time period. Lessors come in different types of categories such as banks, captive leasing
Words: 1767 - Pages: 8
equipment reverts back to Lessor Inc., it is an operating lease.” However, this was incorrect because based on the IAS 17, paragraph 10 – Accounting for Leases: “Situations that would normally lead to a lease being classified as a finance lease include the following: • the lease term is for the major part of the economic life of the asset, even if title is not transferred • at the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair
Words: 495 - Pages: 2
TAS 40 firstly announced to use in 1 January 2011. Basically, TAS 40 applies to give more alternative choices to measure the value of lease hold right in investment property by fair value or cost price. Definition of investment property Investment property is land or a building or part of a building or both held by the owner or the lessee under a finance lease to earn rentals or for capital appreciation or both. However, the property is not investment property when the property held for use
Words: 2268 - Pages: 10
1. Exercise 15-1 Operating lease [LO4] On January 1, 2011, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers from ComputerWorld Corporation under a two-year operating lease agreement. The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by Computer World at a cost of $90,000 and were expected to have a useful life of six years with no residual value. |
Words: 3399 - Pages: 14
To: From: Subject: Lease Type and Lease Structure This memo includes research on leases and lease structure. Through intensive research on the Financial Accounting Standards Board (FASB), three sub-types of leases were found for lessors to account for the leases. The three sub-types are direct financing, sales-type, and operating leases. The international accounting standards board (IASB) and FASB are proposing a draft for lease accounting. The critics are disputing some
Words: 1141 - Pages: 5
principles o f strict products liability which apply to sellers also apply to lessors. I n this Article, Professor Ausness reviews the historical basisfor imposing strict liability in tort on sellers a nd applies these rationales to five basic kinds o f lease transactions. H e concludes that strict liability should not apply when a product defect arises after the leased product is placed in the hands o f the lessee (as contrasted with the more typical case o f " manufacturing defects" which arise when the
Words: 4390 - Pages: 18
11th edition. North Ryde, N.S.W. : McGraw-Hill, 2012. ISBN 9780070997592 Chapter 15 pages 488-515 CHAPTER CONTENTS 15.1 Introduction 15.2 Types of lease contracts 15.3 Accounting and taxation treatment of leases 15.4 Setting lease rentals 15.5 Evaluation of finance leases 15.6 Evaluation of operating leases 15.7 Advantages and disadvantages of leasing 15.8 Chattel mortgages and hire-purchase Graham Peirson ... [et al.] Business Finance. 11th
Words: 3678 - Pages: 15
