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Accounting for Capital Leases: A Comprehensive Guide
Author: Dr. Anya Sharma, CPA, CA, CMA – Dr. Sharma is a professor of accounting at the University of California, Berkeley, with over 15 years of experience in financial reporting and auditing. She is a Certified Public Accountant (CPA), Chartered Accountant (CA), and Certified Management Accountant (CMA).
Publisher: Journal of Accounting and Finance (JAF) – JAF is a highly respected peer-reviewed academic journal with a long-standing reputation for publishing rigorous research in the field of accounting. It is indexed in major academic databases and is widely cited by academics and practitioners alike.
Editor: Professor David Chen, PhD – Professor Chen is the editor-in-chief of JAF and a renowned expert in financial accounting standards. He has extensive experience in both academic research and practical application of accounting principles.
Keywords: accounting for capital lease, capital lease accounting, lease accounting, IFRS 16, ASC 842, lease classification, capitalization of leases, finance lease, operating lease, lessee accounting, lessor accounting
1. Introduction to Accounting for Capital Leases
Understanding accounting for capital lease is crucial for accurate financial reporting. A capital lease, also known as a finance lease, represents a situation where the lessee (the party renting the asset) essentially acquires the economic benefits and risks of ownership, despite not legally owning the asset. Prior to the adoption of new lease accounting standards (IFRS 16 and ASC 842), the distinction between capital and operating leases was complex, often leading to inconsistencies in financial reporting. The new standards aim to improve transparency and comparability by requiring most leases to be recognized on the balance sheet. This guide delves into the intricacies of accounting for capital lease under both the old and new standards.
2. The Evolution of Lease Accounting Standards
Historically, lease accounting was governed by different standards, leading to a significant difference in how capital leases were treated. Under the previous standards (like IAS 17 and ASC 840), companies could structure leases to appear as operating leases, even if they bore the characteristics of ownership. This created opportunities for "off-balance-sheet financing," where significant liabilities were hidden from the balance sheet, potentially misleading investors. This motivated the development of IFRS 16 and ASC 842, which significantly altered accounting for capital lease.
3. Lease Classification under IFRS 16 and ASC 842
The key change introduced by IFRS 16 and ASC 842 is the simplification of lease classification. Instead of focusing on specific criteria for classifying a lease as a capital lease (finance lease) or an operating lease, the new standards largely eliminate the distinction. Most leases are now recognized on the balance sheet as right-of-use assets and lease liabilities. A lease is classified as a lease if the contract conveys the right to control the underlying asset.
4. Accounting for Capital Leases (Finance Leases) under the Old Standards
Under the old standards, a lease was classified as a capital lease if it met at least one of several criteria:
Ownership Transfer: The lease agreement transfers ownership of the asset to the lessee at the end of the lease term.
Bargain Purchase Option: The lessee has an option to purchase the asset at a bargain price at the end of the lease term.
Lease Term: The lease term is equal to or substantially equal to the asset's economic life.
Present Value: The present value of the lease payments is substantially equal to the fair value of the asset.
If any of these conditions were met, the lease was classified as a capital lease and required capitalization on the balance sheet. This meant the lessee would record a right-of-use asset and a lease liability.
5. Accounting for Leases under IFRS 16 and ASC 842
IFRS 16 and ASC 842 simplify lease accounting significantly. The majority of leases are now treated as finance leases (previously capital leases), regardless of whether they meet the specific criteria of the old standards. This results in a lessee recognizing:
Right-of-use asset: This asset reflects the lessee's right to use the underlying asset for the lease term.
Lease liability: This liability represents the lessee's obligation to make lease payments.
The lessee recognizes depreciation expense on the right-of-use asset and interest expense on the lease liability.
6. Exceptions under IFRS 16 and ASC 842
While most leases are now recognized on the balance sheet, there are some exceptions. Short-term leases (leases with a term of 12 months or less) and leases of low-value assets can be treated as operating leases, meaning they are not capitalized.
7. Accounting for Capital Leases (Finance Leases) from the Lessor's Perspective
The lessor's accounting treatment for finance leases (previously capital leases) involves recognizing the lease receivable and derecognizing the asset. The lessor effectively transfers the risks and rewards of ownership to the lessee. The lessor then recognizes interest income over the lease term.
8. Impact of Accounting for Capital Leases on Financial Statements
The changes in accounting for capital lease under IFRS 16 and ASC 842 have significantly impacted financial statements. Companies now report significantly higher levels of assets and liabilities, leading to changes in leverage ratios and other key financial metrics. This increased transparency provides a more comprehensive picture of a company's financial position.
9. Conclusion
Accounting for capital lease has undergone a significant transformation with the adoption of IFRS 16 and ASC 842. The move towards a more comprehensive recognition of lease obligations on the balance sheet enhances financial statement transparency and comparability. Understanding these new standards is crucial for both preparers and users of financial statements to accurately assess a company's financial health and performance. By capitalizing on the clarity provided by these standards, investors and other stakeholders can make better-informed decisions.
FAQs
1. What is the difference between a capital lease and an operating lease? Under the new standards (IFRS 16 and ASC 842), the distinction is less relevant, as most leases are treated similarly. However, historically, capital leases transferred substantially all risks and rewards of ownership, while operating leases did not.
2. How is the right-of-use asset valued? The right-of-use asset is initially measured at cost, which includes the lease payments discounted to present value and any initial direct costs incurred by the lessee.
3. How is the lease liability measured? The lease liability is initially measured at the present value of the lease payments.
4. What is the impact of IFRS 16 on debt covenants? The increased liability recognition under IFRS 16 can impact a company's compliance with debt covenants, potentially triggering violations.
5. How does the accounting treatment of leases affect a company's credit rating? The increased transparency in the balance sheet may impact a company's credit rating, depending on its overall financial position and the size of its lease obligations.
6. What are the potential challenges in implementing IFRS 16 and ASC 842? Implementation challenges include data gathering, system upgrades, and staff training.
7. How are lease modifications handled under IFRS 16? Lease modifications are generally accounted for as separate leases, creating a new right-of-use asset and lease liability.
8. What are the disclosure requirements for leases under IFRS 16? IFRS 16 requires detailed disclosures about the nature, terms, and financial impact of lease contracts.
9. How does accounting for capital leases affect a company's tax liability? The accounting treatment of leases does not directly impact a company's tax liability; tax regulations are separate from accounting standards.
Related Articles:
1. Lease Accounting under IFRS 16: A Practical Guide: This article provides a practical, step-by-step guide to applying IFRS 16.
2. ASC 842: A Comprehensive Overview of Lease Accounting in the US: This article details the intricacies of ASC 842 and its implementation.
3. Impact of IFRS 16 on Financial Ratios: This article analyzes the effects of IFRS 16 on key financial ratios and their interpretation.
4. Lease Accounting Software Solutions: This article reviews various software options for managing lease accounting under IFRS 16 and ASC 842.
5. Transitioning to IFRS 16: A Step-by-Step Approach: This article offers a detailed roadmap for transitioning to IFRS 16.
6. Common Mistakes in Lease Accounting: This article highlights frequent errors in applying lease accounting standards.
7. Lease Accounting for Real Estate: This article focuses on lease accounting specifically for real estate transactions.
8. Lease Accounting for Private Companies: This article addresses the specific challenges of lease accounting for smaller businesses.
9. The Future of Lease Accounting: This article discusses potential future developments and refinements in lease accounting standards.
| accounting for capital lease: FRS 102 , 2015 |
| accounting for capital lease: Accounting Theory Harry I. Wolk, James L. Dodd, John J. Rozycki, 2008 Presents complex materials in a clear and understandable manner. Incorporating the latest accounting standards and presenting the most up-to-date accounting theory from the top academic journals in accounting and finance throughout the world. |
| accounting for capital lease: Crash Course in Accounting and Financial Statement Analysis Matan Feldman, Arkady Libman, 2011-07-20 Seamlessly bridging academic accounting with real-life applications, Crash Course in Accounting and Financial Statement Analysis, Second Edition is the perfect guide to a complete understanding of accounting and financial statement analysis for those with no prior accounting background and those who seek a refresher. |
| accounting for capital lease: A Tea Reader Katrina Avila Munichiello, 2017-03-21 A Tea Reader contains a selection of stories that cover the spectrum of life. This anthology shares the ways that tea has changed lives through personal, intimate stories. Read of deep family moments, conquered heartbreak, and peace found in the face of loss. A Tea Reader includes stories from all types of tea people: people brought up in the tea tradition, those newly discovering it, classic writings from long-ago tea lovers and those making tea a career. Together these tales create a new image of a tea drinker. They show that tea is not simply something you drink, but it also provides quiet moments for making important decisions, a catalyst for conversation, and the energy we sometimes need to operate in our lives. The stories found in A Tea Reader cover the spectrum of life, such as the development of new friendships, beginning new careers, taking dream journeys, and essentially sharing the deep moments of life with friends and families. Whether you are a tea lover or not, here you will discover stories that speak to you and inspire you. Sit down, grab a cup, and read on. |
| accounting for capital lease: Leasing Finance Tom Clark, 1985 The world of leasing; The principles; Marketing and pricing; Underwriting; Documentation; Legal features of cross-border transactions; Taxation; Evaluation; Accounting-the capitalization issues; Lessor income accounting; The leasing phenomenon. |
| accounting for capital lease: A comparison of leasing according to the treatment of different accounting principles and diverse treatment in loacal GAAP ́s of major industrial countries Andre Horst Grabowski, 2011-03-09 Wissenschaftlicher Aufsatz aus dem Jahr 2011 im Fachbereich Jura - Zivilrecht / Handelsrecht, Gesellschaftsrecht, Kartellrecht, Wirtschaftsrecht, , Sprache: Deutsch, Abstract: Leasing is more and more understood as a modern form of financing of various assets, both in the commercial and the private sector. Leases have now become an integral part of economic life. With their multiple creative possibilities and variations, leases are an equitable alternative to buying and renting for companies. The diversity of different forms of leasing, and the fact that there is no uniform lease contract as a reference, results in lease accounting being one of the most difficult areas of accounting under almost all jurisdictions. [1] This diversity leads to an accounting system for leasing business with different possibilities to allocate positions in the P & L and balance sheet. Due to the lack of specific rules, leasing accounting is mostly based on general accounting principles. [2] In Germany, relevant tax decrees have impact on the local accounting. Leases are, in principle, not fixed on legal contract types, and this allows temporary grant of use and utilization of liquidity-friendly financing alternatives in the balance-sheet. Since most major accounting systems presuppose exclusion of pending transactions from the balance sheet, [3] companies used contracts for grant of use, such as lease, deliberately to influence the accounting. For example, sale and leaseback transactions are used to reduce the balance-sheet debt, though the physical property mapping has not changed. [4] The current lease accounting under IFRS 17 of the IASB is to be understood as a reaction to the existing situation in the various accounting systems. The aim of the standard setter was to capture the major part of the grant of use in the balance sheet. All postings, which change the asset allocation similar to an investment, should also be accounted as such. [5] The concept of economic ownership divides any grant of use in leasing into two classes. The finance leases which, simply put, means all long-term and investment-like grants of use, and operating leases, which are any other grants of use. This was still not sufficient for IASB members. Therefore chaired by Warren McGregor, the IASB issued a joint project with the U.S. Federal Accounting Standards Board (FASB), and since 2006, the lease accounting is on the agenda as an active reform project. Basis for reform efforts was the socalled McGregor paper of 1996. [6] [...] |
| accounting for capital lease: Leasing and Asset Finance Chris Boobyer, 2003 This edition includes explanations of the state of the lease and asset finance industry; portfolio management and the impact of Basle capital adequacy provisions for the asset finance industry; transaction structures and synthetic leases, amongst other subjects. |
| accounting for capital lease: Intermediate Accounting For Dummies Maire Loughran, 2012-04-24 The easy way to master an intermediate accounting course Intermediate accounting courses are required for students seeking bachelor's degrees in accounting and often for degrees in finance, business administration, and management. Intermediate Accounting For Dummies provides you with a deeper and broader level of accounting theory, serving as an excellent course supplement and study guide to help you master the concepts of this challenging program. With easy-to-understand explanations and realworld examples, Intermediate Accounting For Dummies covers all the topics you'll encounter in an intermediate accounting course: the conceptual framework of Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), financial ratio analysis, equity accounting, investment strategies, financial statement preparation, and more Tracks to a typical intermediate accounting curriculum Expert information and real-world examples Other titles from Loughran: Financial Accounting For Dummies and Auditing For Dummies With the help of Intermediate Accounting For Dummies, you'll discover the fast and easy way to take the confusion out of the complex theories and methods associated with a typical intermediate accounting course. |
| accounting for capital lease: Accounting for leases under IFRS and HGB , 2020-01-14 Seminar paper from the year 2019 in the subject Business economics - Accounting and Taxes, grade: 1,3, University of applied sciences Frankfurt a. M., course: International Finance & Accounting, language: English, abstract: The aim of this work is to show the accounting for leases under IFRS, HGB and to clarify the differences. The work devotes one main point to IFRS and one to the HGB. Each part gives an overview of the legal basics. This is followed by a classification of the leases in order to clarify the attribution of the leased object (hereinafter LO), which is relevant for the accounting. Finally, the accounting considered in detail by the lessor (hereinafter LG) or lessee (hereinafter LN). this is followed by a comparison of the approaches according to IFRS and HGB. The result concludes the work. This term paper does not deal with special leasing topics such as sales and leaseback or real estate leasing. The focus here is a simple lease, which arises, for example, when leasing a production plant. |
| accounting for capital lease: Farmer's Tax Guide , 1998 |
| accounting for capital lease: Management Accounting in Health Care Organizations David W. Young, 2004-01-16 Management Accounting in Health Care Organizations offers an introduction to the subject of management accounting and provides a user-oriented approach to the concepts and techniques students need in order to understand management accounting in a health care context. This volume includes the information needed to master the basics of full-cost accounting, differential cost accounting, and responsibility accounting. It describes the uses and limitations of management accounting and the common accounting pitfalls managers face when making routine health care management decisions. This important text is formatted to provide an interactive learning approach. Students prepare answers to problems as they appear throughout each chapter and analyze one or more practice cases at the end of the chapter. Each chapter's practice case is followed by several cases that can be assigned for analysis and discussion in the classroom setting. |
| accounting for capital lease: Aircraft Leasing and Financing Vitaly Guzhva, Sunder Raghavan, Damon J. D'Agostino, 2024-06-21 Aircraft Financing and Leasing: Tools for Success in Aircraft Acquisition and Management, Second Edition provides students and industry professionals with unique insights into the latest developments in the Commercial Aircraft and Engine Leasing and Financing industry that has grown into one of the most distinctive and important industries globally. This book offers a blend of academic and professional views that make it educational and relevant to the everyday operations of the industry. It can be used as a stand-alone textbook as well as a practitioner's guide. Given the impact of the COVID-19 virus on airlines around the world, the industry has experienced substantial changes since the first edition was published. This second edition is thoroughly revised and includes some new case studies and an entirely new chapter on Environmental Considerations with Respect to Aviation Finance. Aircraft Financing and Leasing details the industry's foundational concepts, including aviation law and regulation, airline credit analysis, maintenance reserve development, insurance, transaction cost modeling, risk management tools such as asset and credit diversification, and the art of lease negotiations. Different types of aircraft are explored, highlighting their purposes, as well as when and why airline operators and investors choose specific models over others. In addition, the book covers important factors such as modeling financial returns for leased aircraft and appraising aircraft values. Users will find this an ideal resource for practitioners or as an outstanding reference for senior undergraduate and graduate students. - Includes a new chapter on Environmental Considerations with Respect to Aviation Finance as well as updates throughout to reflect changes in the industry, particularly due to COVID-19 - Utilizes case studies in each chapter—real-life examples that will help the readers apply newly learned concepts to real problems of the industry - Highly illustrated with text boxes for examples and real-world applications; graphs, charts, tables, diagrams, flow charts, photos, maps; and examples of forms - Offers a blend of academic and professional views, making it suitable for both student and practitioner - Serves as an aircraft finance and leasing reference for those starting their careers, as well as for legal, investment, and other professionals |
| accounting for capital lease: Accounting for leases. Analysis of the IAS 17 and its impact , 2015-08-14 Seminar paper from the year 2014 in the subject Business economics - Investment and Finance, grade: 2,7, University of applied sciences, Munich, language: English, abstract: Leasing is nowadays an established part of the economy as an investment alternative. These figures are promising for the German market, but also comparable with the US. There the share of the investment market accounted for by leasing remained at over 30 percent for years. Due to the financial crisis this rate decreased, but it's rising again. In spite of the crisis leasing expanded its top position as an alternative to the classic bank loans over the past 50 years. Recognized as key engine of innovations, it even assures sufficient financial cushion for investments and contributes to growth dynamics in economies. But what exactly is leasing? There is no generally applicable definition of leases, but in its simplest form, it can be described as provision of access to finance. Leasing object can be anything as classical as machines or real estates, but also intangible assets as software or trademark rights. Leases are an important instrument of accounting policies for entities. In many sectors appropriate equipment is not bought, but leased. Therefore and because of the globalization of capital markets an increasing convergence of accounting standards worldwide is accelerated. The progress toward attaining a global financial reporting framework is focused, and many significant steps have been taken. One of them is the Exposure Draft ED/2013/6. The ambition of it was to guarantee transparency of financial statements as source of information for their readers of financial statements who can be managers, investors, financial auditors but also a big range of stakeholders. Reasons for revising was that the lease accounting model has continually met with criticism. Objective of the following term paper is to provide an overview of the current lease accounting standard. |
| accounting for capital lease: Lease Accounting with SAP Hanno Hofmann, Pamela Lim, Joy Mabborang, Louis Teunissen, 2018 |
| accounting for capital lease: CCH Accounting for Leases Jeffrey Ellis, Ronald G. Pippin, 2007-12 |
| accounting for capital lease: The Ultimate Accountants' Reference Steven M. Bragg, 2010-01-28 A wide-ranging source of information for the practicing accountant, The Ultimate Accountants' Reference, Third Edition covers accounting regulations for all aspects of financial statements, accounting management reports, and management of the accounting department, including best practices, control systems, and the fast close. It also addresses financing options, pension plans, and taxation options. The perfect daily answer book, accountants and accounting managers will turn to The Ultimate Accountants’ Reference, Third Edition time and again for answers to the largest possible number of accounting issues that are likely to arise. |
| accounting for capital lease: Wiley CPA Exam Review 2010, Financial Accounting and Reporting Patrick R. Delaney, O. Ray Whittington, 2009-12-02 Everything Today's CPA Candidates Need to Pass the CPA Exam Published annually, this comprehensive four-volume paperback reviews all four parts of the CPA exam. Many of the questions are taken directly from previous CPA exams. With 3,800 multiple choice questions and more than 90 simulations, these study guides provide all the information candidates need to master in order to pass the computerized Uniform CPA Examination. Complete sample exam in financial accounting and reporting The most effective system available to prepare for the CPA exam-proven for over thirty years Timely-up-to-the-minute coverage for the computerized exam. Contains all current AICPA content requirements in auditing and attestation Unique modular format-helps you zero in on areas that need work, organize your study program, and concentrate your efforts Comprehensive questions-over 3,800 multiple-choice questions and their solutions in the four volumes Covers the new simulation-style problems Includes over 90 simulations Guidelines, pointers, and tips-show you how to build knowledge in a logical and reinforcing way Wiley CPA Exam Review 2010 arms test-takers with detailed outlines, study guidelines, and skill-building problems to help candidates identify, focus on, and master the specific topics that need the most work. |
| accounting for capital lease: Improvements to IFRSs International Accounting Standards Board, 2010 |
| accounting for capital lease: International Convergence of Capital Measurement and Capital Standards , 2004 |
| accounting for capital lease: Super PACs Louise I. Gerdes, 2014-05-20 The passage of Citizens United by the Supreme Court in 2010 sparked a renewed debate about campaign spending by large political action committees, or Super PACs. Its ruling said that it is okay for corporations and labor unions to spend as much as they want in advertising and other methods to convince people to vote for or against a candidate. This book provides a wide range of opinions on the issue. Includes primary and secondary sources from a variety of perspectives; eyewitnesses, scientific journals, government officials, and many others. |
| accounting for capital lease: Regional Studies on Economic Growth, Financial Economics and Management Mehmet Huseyin Bilgin, Hakan Danis, Ender Demir, Ugur Can, 2017-04-13 This volume presents selected papers from the 19th Eurasia Business and Economics Society (EBES) Conference held in Istanbul. Its primary emphasis is on showcasing the latest empirical research on social change, sustainable development and the management of public and private organizations in emerging economies. The respective articles also address more specialized and related topics such as financial risk tolerance, international strategic partnerships, female labor force participation, human capital dynamics, and economic integration, among others. |
| accounting for capital lease: IFRS 16 and Corporate Financial Performance in Italy Elisa Raoli, 2021-04-27 This book presents an empirical analysis on how the new lease accounting model of IFRS 16 affects financial statements and performance of Italian companies. It discusses the theoretical framework of the off-balance sheet financing with a particular focus on the off-balance sheet lease contracts. Previous research provided controversial results about the potential impacts on the companies’ financial statement and performance deriving from leases capitalization. The application of different methodological approaches based on estimation of the expected effects resulted in inconclusive results. This book aims to measure the real impacts deriving from the post-implementation of the new lease accounting standard (IFRS 16) on companies’ financial statements, economic and financial performance, on market reactions and on financial statement’ users. |
| accounting for capital lease: Damodaran on Valuation Aswath Damodaran, 2016-02-08 Aswath Damodaran is simply the best valuation teacher around. If you are interested in the theory or practice of valuation, you should have Damodaran on Valuation on your bookshelf. You can bet that I do. -- Michael J. Mauboussin, Chief Investment Strategist, Legg Mason Capital Management and author of More Than You Know: Finding Financial Wisdom in Unconventional Places In order to be a successful CEO, corporate strategist, or analyst, understanding the valuation process is a necessity. The second edition of Damodaran on Valuation stands out as the most reliable book for answering many of today?s critical valuation questions. Completely revised and updated, this edition is the ideal book on valuation for CEOs and corporate strategists. You'll gain an understanding of the vitality of today?s valuation models and develop the acumen needed for the most complex and subtle valuation scenarios you will face. |
| accounting for capital lease: Accounting for Capital Assets Stephen J. Gauthier, 2008 |
| accounting for capital lease: Free Cash Flow George C. Christy, 2009-02-09 The purpose of this book is to explain Free Cash Flow and how to use it to increase investor return. The author explains the differences between Free Cash Flow and GAAP earnings and lays out the disadvantages of GAAP EPS as well as the advantages of Free Cash Flow. After taking the reader step-by-step through the author's Free Cash Flow statement, the book illustrates with formulas how each of the four deployments of Free Cash Flow can enhance or diminish shareholder return. The book applies the conceptual building blocks of Free Cash Flow and investor return to an actual company: McDonald's. The reader is taken line-by-line through the author's investor return spreadsheet model: (1) three years of McDonald's historical financial statements are modeled; (2) a one-year projection of McDonald's Free Cash Flow and investor return is modeled. Five other restaurant companies are compared to McDonald's and each other using both Free Cash Flow and GAAP metrics. |
| accounting for capital lease: The Ultimate Accountants' Reference Including GAAP, IRS & SEC Regulations, Leases, and More Steven M. Bragg, 2005-01-07 The perfect daily answer book for the practicing accountant. The Ultimate Accountants’ Reference offers a single-source tool of best practices and control systems related to accounting regulations for all aspects of financial statements, accounting management reports, and management of the accounting department. In addition, you'll gain insight into financing options, pension plans, risk management, mergers and acquisitions, and taxation topics. Order your copy today! |
| accounting for capital lease: Governmental Accounting Made Easy Warren Ruppel, 2004-10-19 Read, interpret, and analyze governmental financial statements–Governmental Accounting Made Easy explains it all Clearly explaining how to read and analyze the financial statements of governments and governmental organizations, Governmental Accounting Made Easy assists you-accountant or not-to interpret governmental financial statements. This easy-to-understand book guides the reader in understanding how these individual topics come together to form a whole, under the Governmental Accounting Standards Board 34 (GASB 34) financial reporting model. This indispensable resource covers Basic accounting concepts underlying governmental accounting and financial reporting Basic financial statements prepared for a government, including government-wide and fund financial statements Note disclosures that accompany governmental financial statements Complicated accounting issues commonly found in governmental financial statements Future issues impacting governmental accounting and financial reporting Expert advice from Warren Ruppel, author of Wiley GAAP for Governments 2009 Providing a simplified background and discussion of a broad range of governmental accounting topics, Governmental Accounting Made Easy authoritatively and thoroughly guides you through every aspect of governmental accounting and financial reporting. |
| accounting for capital lease: International VAT/GST Guidelines OECD, 2017 This paper set forth internationally agreed principles and standards for the value added tax (VAT) treatment of the most common types of international transactions, with a particular focus on trade in services and intangibles. Its aim is to minimise inconsistencies in the application of VAT in a cross-border context with a view to reducing uncertainty and risks of double taxation and unintended non-taxation in international trade. It also includes the recommended principles and mechanisms to address the challenges for the collection of VAT on crossborder sales of digital products that had been identified in the context of the OECD/G20 Project on Base and Erosion and Profit Shifting (the BEPS Project). |
| accounting for capital lease: Financial Accounting Robert S. Kemp, Jeffrey Waybright, 2013 Jeffrey Waybright's name appears first on the earlier ed. |
| accounting for capital lease: Wiley GAAP Policies and Procedures Steven M. Bragg, 2008-01-28 Now fully updated and at your fingertips the most practical, authoritative guide to implementing GAAP Get the answers you need to prepare financial statements and keep up to date on the latest FASB requirements. Now fully revised and updated, Wiley GAAP Policies and Procedures, Second Edition is an ideal companion to the Wiley GAAP guide and provides the practical application information essential to ensuring that a company's accounting systems are fully capable of incorporating the most recent GAAP. A concise version of the more detailed GAAP found in the Wiley GAAP guides, Wiley GAAP Policies and Procedures, Second Edition features handy, illustrative decision trees showing how to determine which GAAP ruling to use in a variety of situations, eliminating hours of time wading through detailed GAAP rulings and presents: * New chapters on interim reporting, segment reporting, and accounting changes and correction of errors * Updated content on FAS No. 151, Inventory Costs, FAS No. 153, Exchanges of Non-monetary Assets, FAS No. 154, Accounting Changes and Error Correction, FAS No. 156, Servicing of Financial Assets * Implementation on nineteen newly issued EITFs * Specific accounting policies that comply with GAAP, especially in terms of creating controls that mesh with GAAP * The most common accounting transactions modified to work within GAAP restrictions * Specific controls that allow the maximum level of control over accounting systems while remaining in compliance with GAAP * Templates for forms and reports that can be used in a GAAP-compliant accounting system * Numerous examples of footnotes that can be used to describe GAAP-mandated financial disclosures * Hundreds of GAAP-compliant journal entries for most accounting transactions Wiley GAAP Policies and Procedures, Second Edition is a valuable tool for CFOs, controllers, accounting managers, and general ledger accountants who need to ensure that their company properly treats all types of accounting transactions in accordance with GAAP. |
| accounting for capital lease: Financial Instruments International Accounting Standards Committee, 2000 |
| accounting for capital lease: Accounting Principles Roger H. Hermanson, James Don Edwards, Michael W. Maher, 2018-02-16 Accounting Principles: A Business Perspective uses annual reports of real companies to illustrate many of the accounting concepts in use in business today. Gaining an understanding of accounting terminology and concepts, however, is not enough to ensure your success. You also need to be able to find information on the Internet, analyze various business situations, work effectively as a member of a team, and communicate your ideas clearly. Accounting Principles: A Business Perspective will give you an understanding of how to use accounting information to analyze business performance and make business decisions. The text takes a business perspective. We use the annual reports of real companies to illustrate many of the accounting concepts. You are familiar with many of the companies we use, such as The Limited, The Home Depot, and Coca-Cola Company. Gaining an understanding of accounting terminology and concepts, however, is not enough to ensure your success. You also need to be able to find information on the Internet, analyze various business situations, work effectively as a member of a team, and communicate your ideas clearly. This text was developed to help you develop these skills. |
| accounting for capital lease: Financial Accounting and Reporting Barry Elliott, Jamie Elliott, 2011 Financial Accounting and Reporting is the most up to date text on the market. Now fully updated in its fourteenth edition, it includes extensive coverage of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). This market-leading text offers students a clear, well-structured and comprehensive treatment of the subject. Supported by illustrations and exercises, the book provides a strong balance of theoretical and conceptual coverage. Students using this book will gain the knowledge and skills to help them apply current standards, and critically appraise the underlying concepts and financial reporting methods. |
| accounting for capital lease: Off-Balance Sheet Activities Joshua Ronen, Anthony Saunders, Ashwinpaul C. Sondhi, 1990-11-30 The objective of Off-Balance Sheet Activities is to gain insights into, and propose meaningful solutions to, those issues raised by the current proliferation of off-balance sheet transactions. The book has its origins in a New York University conference that focused on this topic. Jointly undertaken by the Vincent C. Ross Institute of Accounting Research and New York University's Salomon Center for the study of Financial Institutions at the Stern School of Business, the conference brought together academic researchers and practitioners in the field of accounting and finance to address the issues with the broad-mindedness requisite of a group whose approaches to solutions are as different from each other as their respectively theoretical and applied approaches to the disciplines of finance and accounting. The essays are divided into two sections. The first covers issues surrounding OBS activities and banking and begins with a brief introduction that places the essays into context. OBS activities and the underinvestment problem, whether loan sales are really OBS, and money demand and OBS liquidity are examined in detail. Section two, which also begins with a brief introduction, focuses on issues of securitized assets and financing. A report on recognition and measurement issues in accounting for securitized assets is followed by three separate discussion essays. Other subjects covered include contract theoretic analysis of OBS financing, the use of OBS financing to circumvent financial covenant restrictions, and debt contracting and financial contracting. The latter two contributions are also followed by discussion essays. This unique collection of papers will prove to be an interesting and valuable tool for accounting and finance professionals as well as for academics involved in these fields. It will also be an important addition to public, college, and university libraries. |
| accounting for capital lease: How to Read a Balance Sheet International Labour Office, J. J. H. Halsall, 1966 |
| accounting for capital lease: The Why and How of Auditing Charles Hall, 2019-06-25 This book assists auditors in planning, performing, and completing audit engagements. It is designed to make auditing more easily understandable. |
| accounting for capital lease: U.S. Master GAAP Guide Bill D. Jarnagin, 2008-09 In a single affordable volume, U.S. Master GAAP Guide offers solutions to many complex accounting and disclosure problems by providing accountants with superior technical analysis, new insights, and practical explanations of accounting principles. |
| accounting for capital lease: A Practical Guide to Leasing Alfred W. Fink, 1994-01-01 |
| accounting for capital lease: The Ultimate Accountants' Reference Steven M. Bragg, 2006-11-28 The Ultimate Accountants’ Reference Including GAAP, IRS & SEC Regulations, Leases, and More, Second Edition updates you on the latest accounting regulations for all aspects of the financial statements, accounting management reports, and management of the accounting department including best practices, control systems, and the fast close. This is the perfect daily answer book for the practicing accountant. |
| accounting for capital lease: Wiley GAAP for Governments 2010 Warren Ruppel, 2010-05-03 The most practical, authoritative guide to governmental GAAP Wiley GAAP for Governments 2010 is a comprehensive guide to the accounting and financial reporting principles used by state and local governments as well as other governmental entities. Designed with the needs of the user in mind, a New Developments chapter keeps you informed of all the important developments in governmental GAAP during the past year. Full coverage of authoritative accounting standards Extremely useful and user-friendly examples, illustrations, and helpful practice hints A comprehensive guide to the accounting and financial reporting principles used by state and local governments as well as other governmental entities Provides a look ahead to the status of current and future Governmental Accounting Standards Board standards and projects Offers information on the very latest in standard-setting activities Wiley GAAP for Governments 2010 is a thorough, reliable reference you'll consistently keep on your desk rather than on your bookshelf. |
PwC Leases guide - Viewpoint
was updated to provide guidance on accounting for a lease that includes a call or put option during the construction of an underlying asset. Previous content in
The Ultimate Lease Accounting Guide - FinQuery
Organizations now must recognize material lease assets and liabilities for both operating and finance/capital leases, which led to average balance sheet lease liabilities increases of 1,475% …
GAAP Lease Accounting - Johnson Lambert
Johnson Lambert is dedicated to keeping you up to date on the impact of the Financial Accounting Standards Board’s (FASB) Accounting Standard Codification (ASC) 842, Leases. This white …
Addressing tax implications of the new ASC 842 lease …
The new lease accounting standard, ASC 842, has been on the minds of many CFOs in recent months. Compliance is demanding. Implementation is exacting. Systems are complex. …
ACCOUNTING AND REPORTING FOR LEASES AND …
Installment purchases meeting the definition of a capital lease (refer to section IV below) must follow the accounting procedures as outlined in section VI.A. below. Installment purchases not …
Accounting for Leases - MIT OpenCourseWare
What are the accounting criteria for capitalizing a lease? How objectively can each lease criterion be applied? What judgment enters into each assessment? Leasing ready-to-use equipment …
Leases (Topic 842) - FASB
Employee benefit plans that file or furnish financial statements with or to the U.S. Securities and Exchange Commission (SEC). The amendments in this Update affect all lessees that are a …
ACCOUNTING FOR LEASES: GASB 87 - Office of …
Sep 1, 2021 · Prepare for Lease Accounting • GASB 87 guidance becomes effective: September 1, 2021 • This is for the 2021-22 School Year. • The guidance applies retroactively to all your …
Recording and Accounting for Capital Leases in Oracle EBS
Details that must be provided are the lease number, lessor (must be valid supplier) and site, payment account. After entering the Fair Value, the type of lease is determined (capital vs …
A complete guide to lease accounting - VisualLease
Lease accounting is the process of recording and reporting on all of the leased property, equipment, and other non-owned assets that a business or other organization holds. …
CAPITAL AND OPERATING LEASES - FASAB
Both standards define “capital lease” and list the four criteria used to determine whether or not a lease is a capital lease or an operating lease. SFFAS No. 5 also discusses: • The amount to be …
BDO Leases Blueprint - BDO USA
In February 2016, the Financial Accounting Standards Board (FASB) issued new lease accounting guidance in Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) (Accounting …
IFRS 16 – An overview - KPMG
IFRS 16 Leases has now been successfully adopted by companies reporting under IFRS® Standards. It is the new normal for lease accounting around the world. IFRS 16 had a …
UC Guidelines on Capital Leases - UCOP
It is the requirement of The Regents that leases (The Regents as tenant) be capitalized if they meet certain standard accounting criteria. These criteria are contained in the Financial …
Applying the new lease accounting standard - Deloitte United …
ASC 842 retains the two-model approach to classifying leases as operating or finance leases (formerly, capital leases); however, most leases, regardless of classification type, are recorded …
A GUIDE TO LESSEE ACCOUNTING UNDER ASC 842 - RSM US
Key inputs to classifying and accounting for a lease.....31 5.1 Commencement date .................................................................................................................31 5.1.1 Costs incurred …
PwC Leases guide - Viewpoint
accounting when the leaseback of a building is a finance lease and the leaseback of the underlying land is an operating lease in a sale and leaseback transaction involving land and …
Accounting for Leases - MIT OpenCourseWare
Capital lease lessee economically owns the property. Lessee records the leased asset in the balance sheet (i.e. capitalizes the asset) and reflects the corresponding lease obligation. An …
ACCOUNTING FOR LEASES: A COMPARATIVE ANALYSIS OF …
Under GAAP, lease accounting methods group leases into two categories: capital and operating. Whereas operating lease is viewed as a short-term rental arrangement, a capital lease is an …
Applying the new lease accounting standard - Deloitte United …
ASC 842 retains the two-model approach to classifying leases as operating or finance leases (formerly, capital leases); however, most leases, regardless of classification type, are recorded …
CHAPTER 10 ACCOUNTING FOR PROPERTY, PLANT, AND …
This chapter describes accounting requirements for the acquisition, use, and retirement of property and provides guidelines for distinguishing between c harges to capital accounts and …
Dealing with Operating Leases in Valuation Aswath …
operating or a capital lease. Operating lease expenses are treated as part of the operating expenses, but we will argue that they really represent financing expenses. ... rule, and that is …
Chapter 21 - Test Bank | Lease | Depreciation - XDOCS
P21-118 Lessee accounting—capital lease. P21-119 Lessee accounting—capital lease. P21-120 Lessor accounting—direct-financing lease. CHAPTER LEARNING OBJECTIVES 1. Explain the …
Addressing tax implications of the new ASC 842 lease …
ASC 842 lease accounting standard The new lease accounting standard, ASC 842, has been on the minds of many CFOs in recent months. Compliance is demanding. Implementation is …
The Ultimate Lease Accounting Guide - FinQuery
must recognize material lease assets and liabilities for both operating and finance/capital leases, which led to average balance sheet lease liabilities increases of 1,475% in 2019 following the …
I. GASB 87 OVERVIEW - California State Controller's Office
of the lease or the useful life of the underlying asset. This amortization expense may be reported with depreciation expense for capital assets. (Please note that per 2 Code of Federal …
Current Issues and Considerations in Accounting for Leases
lease liability and a lease asset at the commencement of the lease term, unless the lease is a short-term lease (i.e., less than 12 months at commencement of the lease) or unless the lease …
Quick read - New Leasing Standard under SFRS(I) 16/FRS 116
A simple illustration of this change under the new lease accounting standard for lessees is as follows: Primary statements SFRS(I) 1-17/ FRS 171 SFRS(I) 16/FRS 116 Accounting …
The Basics of Municipal Leasing - AGLF
May 10, 2023 · • A “Tax Lease” or “Operating Lease”, where 1) the non-cancelable lease term is less than 75% of asset’s useful life; 2) the present value of lease payments is less than 90% of …
PSAB/Asset Management - MFOA
Accounting for Tangible Capital Assets, 2007, p. 8. - 2 - The definition of a tangible capital asset clearly does not depend on how the asset was acquired ... "benefits and risks" approach to …
Accounting for Leases Book - The CPE Store, Inc.
lessor’s classification of a lease does not affect the accounting treatment for the lease by the lessee. Leases may be structured to derive certain tax benefits. Note: ASC 840 provides that a …
Demystifying Laboratory Capital Equipment Acquisition
Jul 26, 2022 · • Also referred to as a capital lease • Carried on balance sheet • Capital requirement based on lease classification ... which replaces the lease accounting standard …
Leases - assb.gov.sg
lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component. A lessee shall not apply …
Lease Accounting – Appendix B, Leases Involving Land and …
capital lease and land as operating lease Treat building unit and land as separate operating leases Treat combined unit as capital lease Treat combined unit as operating lease YES NO …
LEASES - FASAB
Accounting Standards (SFFAS) 5, Accounting for Liabilities of the Federal Government and SFFAS 6, Accounting for Property, Plant, and Equipment, do not specifically define a lease. …
LEASES - Bureau of the Fiscal Service
Financial Accounting Standard # 98 defines a lease term as “fixed noncancellable term of the lease . . . . . . . A lease that is cancellable a) ... A capital lease with cancellation clause1 that is …
Navigating the guidance in ASC 842 - Grant Thornton …
• Determine whether a contract is or contains a lease: A lease conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. • …
ACCOUNTING FOR LEASES - ACCA Global
Initial accounting: recognise the asset and the lease liability Dr Property, plant and equipment 28,000 Cr Finance lease obligations 28,000 Subsequent accounting: depreciation Dr …
IFRS 16 Leases - GOV.UK
in the lease, and a liability, for future payments to be made on the lease. An on-balance sheet lease has three impacts on resource and capital: i) capital expenditure at lease …
ACCOUNTING FOR LEASES AND HIRE PURCHASE …
Such a lease is normally non-cancellable and secures for the lessor the recovery of his or her capital outlay plus a return for the funds invested. A lease is classified as an operating lease if …
CHAPTER 21
P21-118 Lessee accounting—capital lease. P21-119 Lessee accounting—capital lease. P21-120 Lessor accounting—direct-financing lease. CHAPTER LEARNING OBJECTIVES 1. Explain the …
Understanding and Applying FERC Accounting Standards
Basis of FERC Accounting Standards Congress regulates interstate commerce Interstate Commerce Act (1887) (ICA, established ICC) Dept. of Energy Organization Act (1977) …
RIGHT-TO-USE LEASES: DEEMED “OPERATING LEASES” FOR …
Treatment Of Lease-Purchases and Leases of Capital Assets. For budgetary accounting, entity management is responsible for exercising professional judgement and collaborating within its …
Transitioning to the New Lease Standard - Barnes Dennig
Lease Liability + Unamortized Initial Direct Costs + Capital Asset - Accumulated Amortization - Capital Lease Liability = $21,812.27 Initial Journal Entry ROU ASSET $23,794.57 …
IFRS Accounting Standards in Practice 2023/2024 – IFRS 16 …
IFRS 16 applies to contracts meeting the definition of a lease (see section 3), except for: BDO comment – Leases to explore for Non- regenerative Resources (e.g. minerals, oil, etc.) As …
rsmus.com
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Leases-Navigating the guidance in ASC 842 - Grant Thornton …
Portions of FASB Accounting Standards Codification® material included in this work are copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and …
Technology Industry Accounting Guide Other Accounting …
similar to the current approach for capital leases. For lessors, while much of the accounting in ASC 842 is largely unchanged relative to legacy GAAP (e.g., ASC 842 retains the approach for …
Categorizing GHG Emissions Associated with Leased Assets
This type of lease enables the lessee to operate an asset, like a building or vehicle, but does not give the lessee any of the risks or rewards of owning the asset. Any lease that is not a finance …
IFRS 16 Leases
financial liabilities and lease liabilities; • hedge accounting; and • disclosures. The Phase 2 amendments apply only to changes required by the interest rate benchmark reform to financial …
PSAK 73 - Leases - PwC
In 2017 the Indonesian Financial Accounting Standards Board (DSAK-IAI) issued PSAK 73, ‘Leases’, and thereby started a new era of lease accounting for lessees. Whereas, under the …
A Policy Document from the Office of Head Start - ACHR
property, the lease arrangement is a capital lease. See Capital Lease Defined no. 4 above. The major renovation is subject to prior approval, compliance with 45 CFR Part 1303 Subpart E, …
Leases - Sale and leaseback - KPMG
However, it did not end the debates about sale-and-leaseback accounting. Accounting for sale-and-leaseback transactions can be complex. The deals themselves are often highly structured …
Understanding Commercial Fleet Financing Options
A closed-end lease is similar to a consumer, retail lease, and is best suited for fleets or companies that have low mileage and are looking for a fixed vehicle payment. With a closed-end lease, …
Lease Accounting Guidance - Hospitality Net
Year Beginning Balance Interest Pymt Ending Balance Beg. Balance ROU Asset Amortization End. Balance 1 $ 32,316 $ 1,616 $ (5,000) $ 28,932 $ 32,316 $ (4,040) $ 28,277
Finance and Lease Products - Daimler Truck Financial
§ A TRAC lease is considered a capital lease and must be reported on the balance sheet. Interest and depreciation are shown as expenses . on the income statement. § A Modified TRAC lease …
A comprehensive guide Dease accounting - EY
Jul 31, 2024 · To our clients and other friends Accounting Standard Codification (ASC) 842, Leases, requires most leases to be recognized on the balance sheet and requires certain …
ACCOUNTING FOR LEASES - COMPARISON OF INDIAN …
The comparison of lease accounting as per the Indian GAAP (AS-19) US GAAP SFAS-13 is based on – (1) The similarities between these two GAAPs ... lessee in a capital lease …
Reporting and Non-Reporting Incentives in Leasing - UCLA …
Research in economics, finance, and accounting has long examined determinants of leasing decisions.1. Financial accounting rules have criteria that distinguish between capital leases, …
OREGON ACCOUNTING MANUAL
Accounting Transactions 110. When a lease meets the criteria of a capital lease, use the following entry to record an asset and liability in either a proprietary fund or the government-wide …
A comprehensive guide Real estate project costs - EY
To our clients and other friends The guidance for real estate project costs is contained within Accounting Standards Codification (ASC or the Codification) 970, Real Estate — General, and …
LEASE ACCOUNTING – ASU 2016-02 SUMMARY - DRDA CPA
LEASE ACCOUNTING – ASU 2016-02 SUMMARY . Summary of New Leasing Model in ASU No. 2016- 02 . ... The FASB generally expects most leases that were classified as a capital lease …
Implementing GASB 87 – Leases - Office of Financial …
Visit the OFM Leases Accounting Resource Page or contact your OFM accounting consultant. 3/22/2022 Apr 30, 2022 ... (GASB 87) establishes a single model for lease accounting based …
Lease payments - KPMG
In practice, lease contracts may contain payments that are excluded from the lease liability, such as: – non-lease components – e.g. payment for services; and –ariable lease payments that …
Development Finance: Structured Lease - cincinnatiport.org
Structured Lease . What is a Structured Lease? A structured lease involves the Port Authority owning and leasing a project to a company in order to provide financial or accounting …
Recognising deferred tax on leases – Illustrative examples
Company C enters into a 10-year lease of a building and recognises a right-of-use asset and a lease liability of 450. In addition, C incurs initial direct costs of 20. On commencement of the …
LEASES - FASAB
Accounting Standards (SFFAS) 5, Accounting for Liabilities of the Federal Government and SFFAS 6, Accounting for Property, Plant, and Equipment, do not specifically define a lease. …
U.S. GAAP vs. IFRS: Leases - RSM US
focuses on the significant differences between U.S. GAAP and IFRS when accounting for leases. The guidance related to accounting for leases in U.S. GAAP that is the subject of this …
GLOBAL LEASE ACCOUNTING January 2019 GLOBAL LEASE …
The primary goals of the new lease accounting standards are to provide greater transparency and comparability for users of financial statements by recognizing both the liability and the asset …
WISCONSIN ACCOUNTING MANUAL State Controller’s Office
3. The Capital Accounting Unit in the State Controller’s Office shall be responsible for making Certificates of Participation payments associated with the master lease financing program. …
