Leases - F2 Flashcards
What is a lease?
A contract that conveys the right to use an asset for a period of time in exchange for consideration
What is a lessor?
Entity that provides the right to use an underlying asset in exchange for consideration
What is a finance lease?
Lease that transfers all risk and reward of ownership
What is the accounting treatment of an operating lease?
Lease receipts show as income in the P&L on a straight line basis
Any differences between the amounts paid will be recognised as accrued income or deferred income
What is the intial accounting recognition of a lease?
Lease receivable is equal to the net investment of the lease.
Calculated as the PV of all unreceived
What is the subsequent treatment of a finance lease?
Increased by finance income
Decreased by cash receipts
