Leases Flashcards
If the the lease term is less than 12 months what category dose it falls.
It is a short term lease.
A entered into lease with B. A the lessee paid a lease bonus. When do B the lessor recognise the non refundable lease bonus
Over the useful life of lease in a straight line method.
How to treat rental expense on operating lease.
Rental expense on Op lease should be recognised on a straight line basis regardless of the actual pmt structure.
Eg actual pmt structure
Y1 1000x12
Y2 3000x12
A. What is to be recognized as rent expense in monthly income.
12000+36000 = 48000/24 = 2000 per month on a SL basis
How to account Leasehold improvements
It is capitallised and depreciated over the useful life of the lease or lease term whichever is lower
What are the components of lease receivable for a lessor involved in direct financing lease.
PV OF MIN LEASE PMTS PLUS RESIDUAL Value. In DFL the lessor records the lease receivable that is equal to PV Of MLP plus any residual value which is usually equal to the FV of the asset.
A Direct financing lease results when a lease doesnt meet any of the 5 requirements to classy it as sales type lease and a 3rd party guarantees a residual value.
Regarding Lease hold improvements done to a property.
Lease term of Orange`s leased asset 10 years
Useful life of the leased asset - 8 years. How to treat cost for the improvements.
Capitalise and depreciate over 8 years. In LH Improvements the cost is capitalised and depreciated over the shorter of lease term or useful life of the leased property.
How is asset obtained from capital lease for equipment reported in a govt wide FS of net asset.
As General Capital asset. As far as cap lease govt report them as regular pvt business as both an asset and liability. Specifically the capital lease becomes the general capital asset. Govt wide fs keep economic resources measurement as focus with accrual basis of accounting.
