F5 Flashcards
Under GAAP, what are the 2 types of leases?
(Rental) Operating Lease or (Sale in substance) Capital Lease/Sales Type/Direct Financing Lease
Under IFRS, what are the 2 types of leases?
(Rental) Operating Lease or (Sale in substance) Finance Lease
For operating leases, how is rental income/expenses recorded?
using straight line method (even if not equal payments)
For operating leases, how is a lease bonus (prepayment) recorded?
deferred charge and amortize SL (ex: commission paid to RE agent)
For operating leases, how is a leasehold improvement recorded?
capitalize and depreciate over lesser of useful life or lease term
For operating leases, how is the fixed asset recorded by the lessor?
depreciate over useful life
For operating leases, how is a nonrefundable security deposit recorded?
Lessor = unearned revenue. Lessee = capitalize, prepaid rent expense
For operating leases, how is a refundable security deposit recorded?
Lessor = A/P. Lessee = A/R
What is the LESSEE criteria under GAAP for a CAPITAL lease?
OWNS= Ownership. Written bargain purchase option. 90% of FV < PV. 75% of asset life < lease term
What is the LESSEE/LESSOR criteria under IFRS for a CAPITAL lease?
OWES FACS= Ownership. Written bargain purchase option. Economic life (majority). Substantially all FV. Fluctuations in FV accrue to lessee. Ability to continue lease. Cancelable. Specialized asset
What is the LESSOR criteria under GAAP for a SALES/DIRECT FINANCING lease?
Lessor needs all the LUC = Lessee “OWNS” property. Uncertainties do not exist regarding unreimbursable costs to be incurred by lessor. Collectability is reasonably assured
For capital leases, how is the lease recorded by the lessee?
Capitalize= (LCM) lesser of FV or Cost. Interest Rate = lesser of implicit rate or lessee’s rate
For capital leases, how is the depreciation of the lease recorded by the lessee?
SL = Asset – SV = Base / Period of Benefit = dep exp
What is the period of benefit for GAAP?
OW = asset life. NS = lease term
What is the period of benefit for IFRS?
lesser of asset life or lease term
For a sales-type/direct financing lease, how do you calculate the gross investment?
GROSS = lease payment + unguaranteed RV
For a sales-type/direct financing lease, how do you calculate the principal (net investment)?
PRINCIPAL = GROSS * PV
For a sales-type/direct financing lease, how do you calculate the interest (unearned int rev)?
INTEREST = GROSS – NET
For a sales-type lease, how do you calculate the COGS?
COGS = Cost of Asset – PV unguaranteed RV
For a direct financing lease what is the PV?
PV = CV = COGS
What are the general rules for sale-leaseback
0% (IGNORE) 10% (RULES) 90% (LOAN) 100%
For subleases, if the original lease is an operating lease, what is the sublease?
operating lease
For subleases, if the original lease is an capital lease, what is the sublease?
OW = capital, NS = operating
What are other terms for stated rate?
coupon or nominal rate
What are other terms for market rate?
effective rate
Are debentures (bonds) secured or unsecured?
unsecured
Are collateral trust bonds secured or unsecured?
unsecured
Are mortgage bonds secured or unsecured?
secured by real property
What is a convertible bond?
can convert to C/S
What is a term bond?
single fixed maturity date (all principle due at end of term)
What is a serial bond?
Pre-numbered bond. Can redeem portion by number
Bonds are usually in denominations of?
$1,000.00
Bond price is quoted at what
100s, % of par value
How do you calculate the check amount (bond interest)
coupon x face
How often is bond interest paid?
US = semiannually, Rest = annually
How do you account for BIC?
defer and amort SL
What is the SL Method of Bond Premium/Discount Amort?
Amort = Premium or Discount / # periods outstanding. Int Exp = Check amount – premium amort + discount amort
What is the Effective Interest Method of Bond Premium/Discount Amort?
Amort = Int Exp – Int Paid. Int Exp = NCV x effective %. Int Paid = Face x coupon %
How do you account for bonds issued between interest dates?
Cash = accrued interest + price of bond
