F6: Leases, Derivatives, Foreign Currency Accounting, and Income Taxes

Question 1

**

OWNES PC what does it stand and where is it used?

Answer 1

This is used in Leases

O - Ownership
W - Written Option
N - Net present value of all lease pmt equal or exceeds assets fair value
- N criteria, 90% or more of the FV is substantial.
E - Term of the lease represents the major part of the economic value
- E criteria, major part of economic life remaining 75% or more
S - Asset is specialized and will ot be used for anything else

P - Present valueof the sum of the lease pmts equal or exceeds assets FV
C - Collection is probable

Question 2

Types of Lease for Lesse and Lesor

Answer 2

Lessee: Operating and Finance Lease
Lessor: Operating Lease, (Finance Lease): Sales-Type and Direct Finance Lease

Question 3

Calcualting Lease Payment, the lessee will include

Answer 3

R - Required contractual fixed payment
E - Exercise option reasonably assured
P - Purchase price at the end of lease
O - ** O**nly indexed or rate variable payments
R - Residual guarantees
T - Termination penalties

N - Nonlease components
G - Guarantees of lessor debt by lessee
O - Other variable lease payments

Question 4

Foreign Currency

Remeasurement Method uses rate for BS and I/S and G/L

Answer 4

Balance Sheet:
Monetary Items = Current/year-end rate
Nonmonetary items = Historic Rate
Income Statement:
Non-balance sheet items = weighted average
Balance sheet related = Historic
Gain and Loss = Income Statement

Question 5

Roreign Currency

Translation Method uses rate for BS and I/S and G/L

Answer 5

Balance Sheet:
Assets = Current/Year-end
Liab=Current/Year-end
Common Stock/APIC=Historic
Income Statement:
All Income Statement Items = Weighted average rate
Gain and Loss = OCI