Chapter 16 - Leases Flashcards
When is interest paid for payment in arrears?
b/f | interest | (payment) | c/f
When is interest paid for payment in advance?
b/f | (payment) | balance | interest | c/f
When do you identify a lease?
contract gives customer:
- all of asset’s economic benefits
- right to direct the asset’s use
Explain substance over form with lease agreements.
Asset legally belongs to lessor
But we have right to use asset for a period of time for consideration.
Initially accounting entry
Dr right of use asset
Cr lease liability (PV)
What to do with deposits?
Deduct from lease liability for table
It is part of cost:
Dr right of use asset
Cr cash
SFP presentation:
What is NCL
Which is balancing figure?
C/f after payment
Current!!!
Do you need to depreciate right of use asset?
YES
How do you depreciate right of use asset?
Transfer to lessee: useful life
No transfer to lessee: shorter of lease term and useful life
What do you do if the lease is short term (less than 12 months)?
lease payments in p/l
no lease liability
no right of use asset
Disclosures
not in OBT
depreciation
interest expense on lease liability
expense relating to short term lease/low value
total cash outflow of lease
addition to right of use asset
carrying amount of right of use asset
What is a sale and leaseback?
sells assets and leases it back immediately
Why do companies sale and leaseback?
raise finance
normally a bank
Sale and leaseback
Need to workout if sale or not, what is the treatment for both?
NOT a sale
Continue to recognise asset
Financial liability = proceeds received
Sale and leaseback
Need to workout if sale or not, what is the treatment for both?
IT IS A Sale
Derecognise asset
Recognise right of use asset/liability
Profit/loss on disposal
