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Intermediate Accounting > 7 - Leases Pt. 1 > Flashcards

7 - Leases Pt. 1 Flashcards

1
Q

Subsequent measurement of right-of-use asset

A

Cost model

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2
Q

Subsequent measurement of lease liability

A

Amortized cost financial liability

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3
Q

Right-of-use asset is initially measured at?

A

@ cost

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4
Q

Lease liability is initially measured at?

A

@ PV of lease payment not yet paid

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5
Q

Lessee recognizes lease liability & right-of-use-asset at what date?

A

@ commencement date

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6
Q

Define the scope of customer’s right of use (but do not prevent customer from having the right to direct the use of an asset)

A

Protective rights

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7
Q

Potential inflows from asset’s outputs

A

Economic benefits

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8
Q

Explicitly stated in the contract or implicitly specified at time made available for use.

A

Identified asset

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9
Q

Entity has right to control the use of an asset if:

A
  1. Right to obtain all of the economic benefits
  2. Right to direct the use of the asset
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10
Q

Provides right to use an underlying asset for a period of time in exchange for a consideration

A

Lessor

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11
Q

Obtains right to use the underlying asset for a period of time in exchange for consideration

A

Lessee

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12
Q

Parties to a lease contract are:

A

Lessor & Lessee

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13
Q

Contract or part of contract that conveys right to use an asset for a period of time in exchange for a consideration

A

Lease

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14
Q

Asset on which financial instruments are based on

A

Underlying asset

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15
Q

Portion of an asset is an identified asset if

A

physically distinct.

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16
Q

Asset is not an identified asset if

A

supplier has substantive right to substitute it throughout the period of use.

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17
Q

A suppliers substitution right is presumed not substantive if

A

it is not readily determinable that it is substantive.

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18
Q

Right to obtain economic benefits from use

A

exclusive use of the asset throughout period.

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19
Q

Right to direct the use:

A

a. customer has right how and for what purpose asset is used
b. asset’s use is predetermined and supplier is not allowed from changing that use.

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20
Q

Existence of right to change how and for what purpose asset is used:

A

a. change the type of output
b. change when output is produced
c. where output is produced
d. change whether output is produced and quantity of it

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21
Q

Do not grant right to direct how & for what purpose asset is used but may grant customer right to direct use of asset if purpose is predetermined

A

Right to operate/maintain

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22
Q

Contracts may specify:

A
  1. maximum amount of use
  2. require customer to follow particular operating procedures
  3. inform supplier of changes how asset will be used
23
Q

Non-cancellable period of a lease

A

Lease term

24
Q

Lease term covers

A

a. option to extend the lease if lessee is certain to exercise
b. option to terminate the lease if lessee is certain not to exercise

25
Q

Period which contract is enforceable

A

Non-cancellable period

26
Q

In assessing if lessee is certain to exercise option entity considers all relevant facts that create

A

economic incentive for the lease

27
Q

Lease payments are discounted using

A

Interest rate implicit in the lease

28
Q

If interest rate implicit in the lease is not determinable what is used?

A

Lessee’s incremental borrowing rate

29
Q

Rate of interest that lessee would have to pay to borrow a similar term, and with similar security

A

Incremental borrowing rate

30
Q

Lessee depreciates the underlying asset over

A

shorter of asset’s useful life and lease term

31
Q

Depreciation starts from

A

commencement date

32
Q

Expense is higher in the earlier years

A

Front-loaded

33
Q

Lessee may elect to not apply recognition requirements for

A
  1. Short term leases
  2. Leases with low value underlying asset
34
Q

Leases that @ commencement date has lease term of 12 months or less

A

Short-term lease

35
Q

Lease that contains a purchase option is

A

not a short-term lease

36
Q

Assessment of value is based on the value of the asset when it is new, regardless of aged asset is being leased

A

Low valued asset

37
Q

Not affected by materiality or the lessee’s size; asset is considered low value regardless whether lessee is small or a big company

A

Absolute basis

38
Q

Lessee may recognize the lease payments for short-term lease and low valued asset as an

A

expense on straight line basis

39
Q

Equal depreciation

A

Straight line basis

40
Q

Lease components are allocated based on the

A

relative stand-alone price

41
Q

While non-lease components are allocated based on the

A

aggregate stand-alone price

42
Q

Lessor would charge for a component separately

A

Relative stand-alone price

43
Q

Separate element if it transfers goods or services to the lessee

A

Non-lease elements

44
Q

Examples of non-lease elements:

A
  1. Maintenance
  2. Security services
  3. Supply of utilities
  4. Supply of goods
  5. Supply of operational services
45
Q

Payments for costs that do not transfer goods or services to the lessee are

A

not a separate component

46
Q

Allows an entity to elect not to separate the lease and non-lease components of a contract instead account for them as single lease component

A

PFRS 16

47
Q

Payments that are variable in legal form but unavoidable in substance

A

In-substance fixed lease payments

48
Q

Payments made by a lessor to a lessee as a reimbursement of costs.

A

Lease incentives

49
Q

Portion of payments made by lessee to lessor for right to use an asset during the lease term that varies in circumstances occurring after commencement date

A

Variable lease payments

50
Q

Estimated amount that entity would currently obtain from disposal of an asset (after deducting estimated costs of disposal)

A

Residual value

51
Q

Lessee accounts for the residual value only if residual value is

A

guaranteed

52
Q

Guarantee made to a lessor (by party unrelated to lessor) that value of an underlying asset will be at least a specified amount

A

Residual value guarantee

53
Q

As to lessee, residual value is guaranteed if:

A
  1. guaranteed by lessee
  2. guaranteed by party related to lessee

Intermediate Accounting (6 decks)

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