Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 198 views

    Intacc 3 Leases Finals

    Uploaded by

    Darryl Agustin
    This document discusses lease accounting for both lessors and lessees. For lessees, all leases are accounted for as finance leases except for short-term or low-value leases, which are accounted for as operating leases. Finance leases require lessees to recognize a right-of-use asset and lease liability on their balance sheet. For lessors, finance leases meet certain criteria that transfer substantially all risks and rewards of ownership to the lessee, while operating leases do not meet these criteria and the lessor retains them. The document provides details on measurement and subsequent accounting for both finance and operating leases for both lessees and lessors.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Intacc 3 Leases Finals

    Uploaded by

    Darryl Agustin
    198 views9 pages
    This document discusses lease accounting for both lessors and lessees. For lessees, all leases are accounted for as finance leases except for short-term or low-value leases, which are accounted for as operating leases. Finance leases require lessees to recognize a right-of-use asset and lease liability on their balance sheet. For lessors, finance leases meet certain criteria that transfer substantially all risks and rewards of ownership to the lessee, while operating leases do not meet these criteria and the lessor retains them. The document provides details on measurement and subsequent accounting for both finance and operating leases for both lessees and lessors.

    Original Title

    INTACC-3-LEASES-FINALS

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document discusses lease accounting for both lessors and lessees. For lessees, all leases are accounted for as finance leases except for short-term or low-value leases, which are accounted for as operating leases. Finance leases require lessees to recognize a right-of-use asset and lease liability on their balance sheet. For lessors, finance leases meet certain criteria that transfer substantially all risks and rewards of ownership to the lessee, while operating leases do not meet these criteria and the lessor retains them. The document provides details on measurement and subsequent accounting for both finance and operating leases for both lessees and lessors.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    198 views9 pages

    Intacc 3 Leases Finals

    Uploaded by

    Darryl Agustin
    This document discusses lease accounting for both lessors and lessees. For lessees, all leases are accounted for as finance leases except for short-term or low-value leases, which are accounted for as operating leases. Finance leases require lessees to recognize a right-of-use asset and lease liability on their balance sheet. For lessors, finance leases meet certain criteria that transfer substantially all risks and rewards of ownership to the lessee, while operating leases do not meet these criteria and the lessor retains them. The document provides details on measurement and subsequent accounting for both finance and operating leases for both lessees and lessors.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 9

    LEASE ACCOUNTING o Dismantling, removal, and

    restoration cost (shall be in


    LEASE
    PRESENT VALUE)
     Contract that conveys the right of use of an  Subsequent Measurement: Cost
    asset in exchange for consideration Model (Cost – acc dep – acc
     A special liability impairment losses)
     Lessor – provides the underlying asset o 2 Scenarios for depreciation:
     Lessee – obtains or receives the underlying a. Transfer of Ownership
    asset b. Option to Purchase
    o EITHER of the two
    Types of Lease scenarios is present =
    Residual value at the end of
    1. Operating Lease
    useful life
     There is no substantial transfer of
    o NEITHER of the two is
    ownership and risks
    present = guaranteed
     Aka rent residual value (unguaranteed
    2. Finance Lease RV = ignored)
     There is substantial transfer of o For useful life:
    ownership and risks a. EITHER of the two =
     SUBSTANCE OVER FORM useful life of the asset
     Form: Rent, Substance: Sale b. NEITHER of the two
    o Yung nasa contract is rent but = useful life vs. lease
    magiging sale or is a sale term (SHORTER)
    since may transfer of 2. Lease Liability
    ownership and risks  Initial Measurement: Present Value
    o Ex. Rent to own of Minimum Lease Payments
    ACCOUNTING FOR LESSEE (obtains/receives) o How to get PV? Use rate
    (priority)
     ALL leases are accounted as Finance Lease 1. Implicit Interest Rate
     Exception: (will be accounted as Operating 2. Incremental
    Lease) Borrowing Rate
    a. Short-term Lease (12 months or less) o Minimum Lease Payment
    b. Low Value Lease components:
     Measured by professional 1. Fixed/variable lease
    judgment (bahala ka sa payment
    buhay mo kung mababa ba 2. Guaranteed residual
    yung halaga ng isang bagay value by the lessee
    or not) 3. Purchase option
     Value of the PPE = “NEW” reasonably expected
     May be more than 12 months to be exercised
    4. Termination penalties
    Finance Lease (Lessee)  Subsequent Measurement:
    1. Right of Use Asset (RoUA) Amortized Cost
     Initial Measurement: Cost o Effective Interest Method
    o IM of Lease Liability (MLP) (Carrying amount x Effective
    o Initial direct cost incurred by Rate)
    the lessee
    o Lease bonus
    o Lease incentives
    (DEDUCTED)

    LTY.
    ACCOUNTING FOR LESSOR (provides) PV of Ordinary Annuity of 1 for Non-Casio users:
    1. Finance Lease (lease capitalization criteria)  1.10
    a. Transfer of ownership  ÷ (walang lalabas na k kasi wala raw si sir sa
    b. Option to purchase is expected to be calcu haha)
    realized  = (pindutin kung ilang periods)
    c. Material lease form (lease term is  GT
    75% of useful life)
    d. Substantial PV of minimum lease Present Value of 1 for Casio users:
    payment (MLP = 90% of FV of asset) Ex. Implicit rate is 10% (10% + 1 = 1.10)
    2. Operating Lease
     None of the above  1.10
     Rent Income  ÷
    o Straight-line method (add  ÷
    lahat ng income then divide  =
    by yrs)  1
     Initial Direct Cost paid by Lessor  M+ (pindutin kung ilang periods)
    o Added to carrying amount of
    the asset Note: wala nang mr/mrc kasi pv lang naman ito and
    o EXPENSED over the lease hindi pv of oa
    term Present Value of 1 for Non-Casio users:
     Lease Bonus
    o Unearned revenue  1.10
    o INCOME over the lease term  ÷
     Security Deposit  = (kung ilan yung periods)
    o Refundable
    Note: walang GT since pv nga hindi pv of oa ang
    o Current/noncurrent Liability
    kulet
    CALCULATOR TIPS & TRICKS NI SIR KEN
    Amortized Cost:
     Ordinary Annuity – payable at the end
    Ex. Implicit rate is 10% (10% + 1 = 1.10)
    (used)
     Annuity Due – payable at the beginning  Carrying amount
    (advance)  x
    PV of Ordinary Annuity of 1 for Casio users:  1.10
     =
    Ex. Implicit rate is 10% (10% + 1 = 1.10)  -
     Payment
     1.10
     =
     ÷
     ÷ (lalabas yung k. ken daw meaning pero
    joke lang)
     =
     1
     M+ (pindutin kung ilan yung periods)
     MR or MRC

    LTY.
    PV of Annuity Due of 1 for Casio users:
    Ex. Implicit rate is 10% (10% + 1 = 1.10)

     1.10
     ÷
     ÷
     =
     1
     M+ (pindutin kung ilang periods less 1 kasi in
    advance)
     MR or MRC
     +1
     =
    PV of Annuity Due of 1 for Non-Casio users:

     1.10
     ÷
     = (kung ilang periods less 1)
     GT
     +1
     =

    LTY.
    ACCOUNTING FOR LESSOR Unearned Interest Income
    FINANCE LEASE – LESSOR

     Lease capitalization criteria (any of the ff.)

    a. Direct Finance Lease


     Business Model: Lease
     Income: Interest Income
    b. Sales Type Lease  Still unearned but will be earned using
     Business Model: Sale, Dealers effective interest method
     Income: Interest Income, Gross Profit
    o Gross Profit = Sales, (COGS) Sales

    Gross Investment

     If no annual rentals, work back


     RV / Option – whether guaranteed or
    unguaranteed, considered in the  Guaranteed RV – w/c ever is lower
    computation  Unguaranteed RV – w/c is lower & deduct
     Residual Value – if it will revert back to the PV of unguaranteed RV
    lessor
     Option – reasonably certain
     Gross Investment is the same whether
    direct finance or sales type lease
    Net Investment (Lease Receivable)

     Net Investment for Sales Type Lease –


    same with gross investment but PV

    LTY.
    Cost of Goods Sold (Cost of Sales) Gross Profit (Gross Income)

     Guaranteed RV – same with the net


    investment of direct finance
     Unguaranteed RV – deduct the PV of
     Gross Profit – is the same whether
    unguaranteed RV
    guaranteed RV or unguaranteed RV
    Lease Receivable

     Subsequent Measurement: Amortized Cost

    LTY.
    Problem 1 4. Interest Income for the Current Year

     Lease Receivable = Net Investment


     Interest Income: Effective Interest
    Method = CA x ER or Implicit Interest
    Rate
    5. Gross Income for the Current Year

     Dealer – sales-type lease


     Equipment will revert back to the lessor – RV
    is considered

    1. Gross Investment

     Guaranteed Residual Value

    Problem 2

    2. Net Investment

     Annual Rental Payment = workback

    3. Total Financial Revenue (Total


    Interest/Unearned Interest Income)

    LTY.
    Problem 3 Problem 4

     Will revert back to lessee = NO RV


     Due in advance = annuity due
    1. Gross Investment
    1. Annual Lease Payment in Advance

     Work back
     Will revert back to the lessee = NO RV 2. Total Financial Revenue (Unearned Interest
    2. Net Investment Income)

    3. Unearned Interest Income

     Gross Investment = NO RV
     Net Investment – no given IDC

    4. Interest Income for the Current Year

    LTY.
    SALE AND LEASEBACK Right of Use Asset

    Gain/Loss (Sale)

     Right Transferred – amount na napunta kay


    lessee
     Seller to Buyer = SALE o Right Transferred = FV – Right
     Pina-lease ni buyer yung asset kay seller. Retained
    Hence, Buyer-Lessor & Seller-Lessee Problem 5
    Sale

     FV (selling price) vs CA
    o > Gain
    o < Loss
    Lease

     Buyer-Lessor
    o Direct Financing Lease (NO Sales-
    Type Lease since rent only and not 1. Initial Lease Liability
    for sale)
    o Operating Lease
     Seller-Lessee
    o Finance Lease
     Lease Liability 2. Cost of ROUA
     Right of Use Asset
    Right Retained / PV of Lease Liability

     Initial Lease Payment = PV of MLP


     Right Retained – portion not sold (FV – SP)

    3. Gain on Right Transferred

    LTY.
    4. Depreciation of ROUA 3. Depreciation of ROUA

     NEITHER of the two scenarios = 4. Loss on Right Transferred


    guaranteed RV, UL vs LT w/c ever is
    lower
    5. Net Rental Income (Lessor)
     Operating Lease (none of the finance
    lease criteria) = Straight Line Method 5. Net Rental Income (Lessor)

     Operating Lease
    Problem 6

    1. Initial Lease Liability

    2. Cost of ROUA

    LTY.

    You might also like