Leases

Question 1

Criteria for Finance Lease

Answer 1

1. Transfer of ownership
2. Purchase option reasonably certain to exercise
3. Lease term major part of economic life
4. PV substantially all of FV
5. No alternative use for asset

Question 2

Measuring ROU

Answer 2

Lease liability + any lease pmts made before/at commencement date - less incentives received + initial direct costs

Direct costs deferred & amortized over lease term straight line for both operating and finance leases

Variable lease pmts depending on index/ rate

Guaranteed residual value expected to be payable