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Flashcards in F5: Operating Leases Deck (15)
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Lessee Accounting: Lease Rent Expense

Records rent expense over lease term


Lessee Accounting: Lease Bonus (definition too)

-Prepayment for future expenses (example- commission paid to real estate agent)
-Classified as an asset (deferred charge) and amortized over life of lease


Lessee Accounting: Leasehold Improvements (definition too)

-Improvement made that is not removable from the premises
-Capitalize and add to PPE


Lessee Accounting: Rent Kicker (definition too)

-Premium rent payment
-Period expense


Lessee Accounting: Free or Reduced Rent Consideration

Take TOTAL rent for entire lease and divide by number of years to properly take rent expense evenly over the term


Leasehold improvements depreciated how:

Over the LESSER of:
-Lease life
-Asset/improvement life


Lessor Accounting: Fixed Asset

Depreciate over asset's useful life
*Lessor depreciates, not lessee*


Security Deposits: IF Nonrefundable

-Deferred by lessor (unearned revenue) and
-Capitalized by lessee (prepaid expense) until lessor considers deposit earned


Security Deposits: IF Refundable

-Liability by the lessor and
-Receivable/asset by the lessee until deposit is refunded


With a free/reduced rent consideration, Rent expense (if lessee) or rent income (if lessor) do what?

They stay the same amount no matter what period (so if it's in the free period or not)


Trick to remember with nonrefundable deposits:

Only recognize as revenue when fully earned, and not in advance


Sale-Leaseback Transaction: If Substantially All Rights Retained, what to do with a gain resulting from the sale?

Defer all gains and amortize


Sale-Leaseback Transaction: If Rights Retained are within 10% - 90%, what to do with a gain resulting from the sale?

Defer all gains up to the present value of the minimum leaseback payments


Sale-Leaseback Transaction: If Minor portion of rights retained (<10%), what to do with a gain resulting from the sale?

Recognize gain at the time of sale; do not defer


If first payment due at time of lease, what is not included in payment?

Interest expense (it's just principal)