Questions On Finance Lease And Operating Lease Essay

Question a It can be found from the IAS 17; the lease is defined that â€Å"A lease is an arrangement whereby the lessor coveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time†. (IAS 17, 2003). There are two types of lease: finance lease and operating lease. The following parts will identify them separately and accounting treatments will be discussed in lessees’ and lessors’ aspect. Firstly, it is the finance lease and it is a lease that transfers substantially all risks and rewards incidental to ownership of an asset (IAS 17, 2003). In the lessees’ financial statement aspect, the finance leases should be recognized as assets and liabilities in their balance sheet at the amounts equal to the fair value of the leased property at the inception of the lease term. Separately, the leased asset should be â€Å"capitalized in property, plant and equipment at the lower of lease payments and its fair value† (Barry Elliott Jamie Elliott, 2013), besides, the initial direct cost incurred should be recognized as the amount of its assets. When the subsequent measurement carries on, for each accounting period the leased asset depreciates in accordance with the lessee’s normal depreciation policy (IAS 16 PPE). Further more, if there is an ownership transferred at the end of the lease, the depreciation should cover the useful life of the asset; otherwise the asset is depreciated over the shorter of the lease term and its usefulShow MoreRelatedCase 11 6 Lessee Ltd Essay671 Words   |  3 PagesCase 11-6 deals with Lessee Ltd., a company that operates in Britain and uses IFRS. The question in this case is how to classify a lease that Lessee, Ltd. acquired from Lessor Inc. The accounting standard that deals with leases under IFRS is IAS 17. IA S 17 was originally issued in September 1982 and was reissued in December 2003. It classifies leases as either finance leases or operating leases. Finance leases make it so that the lessee recognizes an asset and a liability and the lessor recognizesRead MoreBrief Description Of Different Leasing Options1213 Words   |  5 PagesDescribe different leasing options. Before beginning the brief description of different leasing options, it would be best to define the term ‘lease.’ According to Investopedia, the term ‘lease’ is a contract outlining the terms under which one party agrees to rent property owned by another party (Investopedia, no date). Furthermore, it seals/guarantees the ability for the lessee, the tenant, use of an asset and guarantees the lessor, the property owner or landlord, regular payments from the lesseeRead MoreDepreciation and Correct Answer1282 Words   |  6 Pagesï » ¿Question 1 1 out of 1 points Which of the following disclosures are optional under IAS 12? 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Examples of assets that canRead MoreWhat Changes Were Made As A Result From The New Accounting Standards?755 Words   |  4 PagesStandards Board and the Financial Accounting Standards Board both released new requirements for leases that will be in effect for public companies 2018 and others in 2019. The purpose of this paper is to attempt to understand the thought process of the two organizations behind this change. The questions that are delved into are what changes have been made, whether managements were ethical in reporting of leases, the impact on financial reporting, the reason behind the changes, and the similarities asRead MoreFinancial Accounting 31644 Words   |  7 Pages FINANCIAL ACCOUNTING III – ACCT 3018 ASSIGNMENT 1 DUE : TOTAL MARKS = 50 QUESTION 1 Marks=10 Listed below are items that are treated differently for accounting purposes than they are for tax purposes. Indicate whether the items are permanent differences OR temporary differences. 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