Chapter 21: Accounting for Leases Flashcards
How should the lesee in a finance lease value leased assets and liabilities?
PV of lease payments
How should the lesee in a operating lease value the amortization of a right-of-use asset?
Lease payment
minus
Lease Liabillity
How should the lessor in a sales-type lease value a lease receivable?
PV of lease payments
plus
PV of residual value
(guaranteed or ungaranteed)
When performing the present value test, what values should be used in the calculation?
- Fixed/variable lease payments
- Guaranteed residual value
- Payments related to purchase or termination
How is the lease payment calculated?
Fair value of leased property
minus
PV of residual value
equals
Amount to be recovered by lessor through lease payments
divided by
PV Factor of Ordinary or Annuity Due
How should guaranteed and unguaranteed residual values be treated by the lessor or lesee?
How should executory cost be treated when determing the lease liability?
Should be included in lease liability calculation, if included with fixed payment
Expense, if paid directly to third-party
How does the lesee report information related to leases in the financials?
How does the lessor report information related to leases in the financials?
What effect will the new lease provision have on return on assets?
Decrease
Because assets with increase
What effect will the new lease provision have on debt to equity?
Increase
Due to increase in liabilities
What effect will the new lease provision have on interest coverage ratio?
Decrease
Due to increase in interest expense
How should bargin purchase options be treated when calculating the lease liability?
Increase PV of lease payment by the PV of the option
How should short term leases be treated?
May elect to expense
