Deck 13 Flashcards
Another way to calculate ordinary annuity if only the annuity due payment is given:
Annuity due - 1 = ordinary annuity
Amortization of leasehold improvements should be over the shorter of:
Life of the improvements or the remaining life of the lease
With a capital lease, the lessee should amortize the leased property over the:
Economic life of the asset when there is a bargain purchase option
Nonrefundable security deposits
Deferred by the lessor and capitalized by the lessee
Refundable security deposits
Treat as a receivable by the lessee and a liability by the lessor until the deposit is refunded to the lessee
Income from leased asset =
Monthly rentals + lease bonus amortization - depreciation
Capital lease criteria for lessee (OWNS)
Ownership transfers at end of lease; written option for bargain purchase; 90% of leased property FV
Sales-type/direct financing type criteria for lessor (LUC)
Lessee “owns” the leased property; Uncertainties regarding costs do not exist; Collectibility of the payments is reasonably predictable (Must meet all 3)
Sales - type lease:
FV of leased property differs from the carrying amount; 2 profits: gain on sale and interest income
Direct financing lease:
FV is the same as the carrying amount; 1 profit: interest income
What is included in the capitalized amount?
Required payments (PV of annuity due or ordinary annuity), PV of $1 for both the BPO and guaranteed residual value
Period of benefit (depreciable life) - US GAAP:
OW: Over the assets life; NS: depreciate over lease life
Period of benefit (depreciable life) - IFRS:
Shorter of lease term and useful life
Gross investment for lessor accounting =
Lease payment + unguaranteed residual value
Net investment for lessor accounting =
Gross investment x PV
Unearned interest revenue for lessor accounting =
Gross investment - net investment
What type of lessor lease is COGS recorded?
Sales-type lease (not direct financing)
Under a sales-type lease, Cost + profit =
Present value = selling price = FV
The lease will be recorded as both an asset and liability at the lesser of:
FV of the asset or the cost to lease the asset (PV of minimum lease payments)
An entity’s revenue may result from a decrease in a:
Liability from primary operations
