New f5 - Leases and Bonds Flashcards
Operating Leases - Lessee
- Lease Rent Expense
Rent expense xxx
Cash/rent payable xxx - Lease Bonus - Future expense, will be classified as asset and amortized using the straight-line
- Lease improvement - the only capitalized
depreciated over the lesser of 1) lease term or 2) asset life - Free month （总和evenly divided, amortized)
a. free month (no actual cash payment)
Rent expense xxx
rent payable xxx
b. normal month
rent expense xxx
rent payable xxx (taking out, amortize)
Cash xxx - Refundable security deposit - asset, until refunded by the lessor
Operating Leases - Lessor
- Depreciation, yes, over asset useful life （自己的东西!)
- rental income
cash xxx
Rental income xxx - security deposits - not income, dont recognize
- free month
free month ( no actual cash coming in)
rent receivable xxx
rent income xxx
normal month
cash xxx
rent income xxx
rent receivable xxx (amortized out)
Capital Lease - Lessee - Criteria (US GAAP)
OWNS (just meet one!)
Ownership transfer
Written options for bargin purchase
90% * Fair value < Present value of lease payment
75% * asset life < Lease terms
Capital Lease - Lessee - Criteria (IFRS)
- ownership transfer
- bargain purchase options
- MAJOR part of the economic life is for leasing
- PV of lease payment is substantially ALL of Fair value
- Gains and losses from the fluctuation in the fair value of the residual accrue to the lessee
- lessee has the ability to continue the lease
- the lessee can cancel the lease
- the lessee can use the asset without modification
Capital Lease - lessor - criteria (US GAAP)
LUC must meet all!!
- L - Lessee “owns” the asset
- U - no uncertainties
- C - Collectability is good
Operating and Capital lease
Operating Lease
- US GAAP: Operating Lease
- IFRS: Operating Lease
Capital Lease
1. US GAAP: Sales-type lease (two profits: sales profits and interest income)
Direct financing lease (one profit only: interest income)
2. IFRS : Finance Lease
Capital Lease - Lessee - Capitalized Amount
Leased Asset xxx
Liability xxx
Capitalized amount = lower of fmv or PV of min. lease pmt
PV of min. lease pmt
include: pv of guaranteed residual value
include: pv of bargain purchase option
exclude: executory cost (insurance, taxes, repair and maintenance)
Discount rate = lower of
(1) rate of
Capital Lease - Lessee - Major topics
- Capitalized Amount (lower of FMV or mini. payment; pick up a lower interest rate)
Lease asset xxx
Obligation under lease xxx - Depreciation (capitalized amount - salvage （就是fair value) ) / asset or lease life
O - asset life
W - asset life
N - lease life
S - lease life
Depreciation exp xxx
accumulated depreciation xxx
- Depreciation (IFRS) shower of lease term or asset life
- Amortization schedule and J/E
J/E
(1) created the capital lease
Leased Asset xxx
Obligation xxx
(2) First lease payment (no actual cash yet)
Interest expense xxx
Interest payable xxx
(3) actual payment
Interest payable xxx
Obligation xxx (下降）
Cash xxx 真付钱
(4) Depreciation
Depreciation expense xxx
acc. depreciation xxx
Capital Lease - Lessor (Sales-type)
Sales-type two profits (sales profits and interests income) 1. Interest income (unearned) = Gross investment - net investment
Gross investment = lease payment + Unguaranteed residual value
Net investment = Gross investment x PV
- sales profit
[Fair value = PV of min. pmt = selling price] - COGS = Sales profits
COGS = Cost of asset, historical cost - PV of unguarantteed residual value
Capital Lease - Lessor (Direct Finance )
one profit (sales profits and interests income) 1. Interest income (unearned) = Gross investment - net investment
Gross investment = lease payment + Unguaranteed residual value
Net investment = Gross investment x PV
Sales-leaseback (how much tentative gain can be recognized and deferred?)
step 1 - identify the type of lease
step 2 - know the core formula Operating lease Selling price - carrying amount = tentative gain - pv of min. payment = gain recognized, keep
Capital lease selling price -carrying amount = tentative gain - lower of fair value or pv of min. payment = gain recongized, keep
step 3 - how much tentative gain can be recognized or deferred? answer
if operating lease -> selling price / pv of min. pay
if capital lease -> selling price / lower of fair value or pv of min pay
90% - defer all tentative gain
if loss, recognized all.
IFRS - operating lease -> recognized all gain
IFRS - capital (finance) lease -> defer all gain
Sublease
original lessor (no change)
1st lease (operating) -> sub lease (operating)
1st lease (capital) -> O,W -> sub lease (capital)
-> N,S -> sub lease (operating)
Bond - WOOHOO!!
Issued at Discount - Market% > Stated% （市场给的更多，只能便宜处理了，所以是discount)
Issued at Premium - Market% < Stated% (居然比市场给的还多，说明枪手，premium)
When issuing the bond
Cash xxx
Bond Payable xxx
Premium xxx
Cash xxx
Discount xxx
Bond Payable xxx
Bond - Amortization schedules and J/E
Straight line amortization (not permitted in ifrs)
Issued price - face value = discount or premium
discount or premium / bond terms = periodic amortization
-> Bond issue cost - > new card
Effective amortization
stated% * bond face = interest paid, (real cash) Balance sheet
market% * carrying = int. exp., I/S
int. expense (I/S) - int. paid (B/S) = amortization
J/E (borrower)
1. when established the bond
Cash xxx
discount xxx
bond pay. xxx
- 1st interest payment （cash比实际expense付得多，因为discount拉后腿了）
interest expense (I/S) xxx
Cash (B/S) xxx
discount(amt) xxx - when established the bond
cash xxx
premium xxx
bond pay. xxx - 1st interest pay （cash比实际expense少，因为premium帮忙了）
interest exp. xxx
amort. premium xxx
cash xxx
算carrying amount是加还是减？记住 work towards the FACE!!!
Bond - Bond issue cost
Bond issue cost
- asset, and then straight line amortization (GAAP only)
examples - legal fees, accounting fees, underwriting commissions, and printing
Cash 93,000
discount 2,000 (plug)
bond issue cost 5,000
Bond payable 100,000
under IFRS, bond issue is not a separate asset. effective amortized with bond
straight line amortization is only for GAAP
Bond - 中途Carrying的比较
f5-44 图！
Bond - Amortization schedules and J/E （investor)
- when purchase the bond
investment 直接carrying amt xxx
cash xxx (（给了多少钱就是多少钱） - interest paid
cash xxx (state% * face)
interest revenue (i/s = int.exp) xxx
investment (= premium) xxx
拿到了比真正revenue更多的钱，因为有premium
2. interest paid
cash xxx
investment xxx
interest revenue xxx
那打了比真正revenue少的钱，因为discount(borrower)拖后腿
Bond - issued between interest date
先收补的
cash xxx (real+interest补的)
Discount xxx
Bond payable xxx
interest expense xxx
后给整的
Bond interest exp. xxx
cash xxx
Convertible Bonds （一体化，bond自己convert)
- book value method
- market value method
book value method (GAAP, no I/S involved, APIC plug)
1. issue the bond (always premium, because the convertible feature)
cash xxx
bonds payable xxx
premium xxx
- converted
bonds payable xxx (original w/o)
premium xxx (orginal w/o)
common stock xxx (at par)
APIC - c.s. xxx (plug)
no i/s involved!!
Market value method (n-gaap, yes I/S)
1. original issue
cash xxx
bond payable xxx
premium xxx
- converted
bond payable xxx (w/o)
premium xxx (w/o)
Loss xxx (plug)
common stock xxx (par)
APIC - C.S xxx (match market!!)
Gain xxx (plug)
yes, I/s impact
Detachable Warrant Bond （分体化）
最大的特点： 只跟 warrant有关系
- Warrant only method
- Market value method
这两周method只用来allocate warrant value
- Warrant only method
when issued
cash xxx
Discount xxx (plug)
Bond payable xxx (par value)
APIC - warrant xxx (known, market value)
Premium xxx (plug)
when exercised
Cash额外 xxx
APIC - Warrant xxx (w/o)
Com. Stock xxx
APIC - c.s xxx (plug)
其实就是book value method, no i/s involved
expired
APIC - warrant xxx (w/o)
APIC xxx
- market value method
(FMV of warrant / total FMV) * selling price = allocated value of warrant
cash xxx
discount xxx (plug)
bond payable xxx (par)
apic - warrant xxx (allocate)
premium xxx (plug)
extinguishment of debt
CORE Formula
Reacquisition cost
- Carrying amount (unamortized premium, discount or issue cost)
= gain / loss
gain / loss could be income from continuing operations or extraordinary items (if infrequent and unusual)
j/e
Bond payable xxx (w/o)
Loss xxx (plug)
Cash xxxx (reacquisition )
Unamt Discount xxx (w/o)
unamt issue cost xxx (w/o)
