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    Leases (Books of Lessee)

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    The Brain Dump PH
    This webinar discusses accounting for finance leases from the lessee's perspective. [1] Under a finance lease, the lessee recognizes a right-of-use asset and lease liability on its balance sheet. [2] The right-of-use asset is initially measured at the present value of lease payments plus initial direct costs, while the lease liability is initially measured at the present value of lease payments. [3] Both the right-of-use asset and lease liability are subsequently measured using the effective interest method with the right-of-use asset being amortized over the shorter of the lease term or its useful life.

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    Leases (Books of Lessee)

    Uploaded by

    The Brain Dump PH
    232 views2 pages
    This webinar discusses accounting for finance leases from the lessee's perspective. [1] Under a finance lease, the lessee recognizes a right-of-use asset and lease liability on its balance sheet. [2] The right-of-use asset is initially measured at the present value of lease payments plus initial direct costs, while the lease liability is initially measured at the present value of lease payments. [3] Both the right-of-use asset and lease liability are subsequently measured using the effective interest method with the right-of-use asset being amortized over the shorter of the lease term or its useful life.

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    This webinar discusses accounting for finance leases from the lessee's perspective. [1] Under a finance lease, the lessee recognizes a right-of-use asset and lease liability on its balance sheet. [2] The right-of-use asset is initially measured at the present value of lease payments plus initial direct costs, while the lease liability is initially measured at the present value of lease payments. [3] Both the right-of-use asset and lease liability are subsequently measured using the effective interest method with the right-of-use asset being amortized over the shorter of the lease term or its useful life.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    232 views2 pages

    Leases (Books of Lessee)

    Uploaded by

    The Brain Dump PH
    This webinar discusses accounting for finance leases from the lessee's perspective. [1] Under a finance lease, the lessee recognizes a right-of-use asset and lease liability on its balance sheet. [2] The right-of-use asset is initially measured at the present value of lease payments plus initial direct costs, while the lease liability is initially measured at the present value of lease payments. [3] Both the right-of-use asset and lease liability are subsequently measured using the effective interest method with the right-of-use asset being amortized over the shorter of the lease term or its useful life.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    WEBINAR TOPIC: ACCOUNTING FOR Asset

    FINANCE LEASES (BOOKS OF LESSEE) Cost XX

    Lease – a contract or part of a contract that


    conveys the right to use the underlying asset for - exclusions from cost of ROUA:
    a period of time in exchange for consideration.
    - leasehold improvement (under PPE;
    ▪ lessee – entity that obtains the right to use an depreciated using the shorter between the
    underlying asset. lease term and useful life)

    Operating Lease Model for Lessee: - executory costs (expense)

    - lessee is permitted (not required) to make - refundable security deposit (receiv.)


    an accounting policy election to apply
    - subsequent measurement: cost model (cost
    operating lease accounting in two optional
    less accumulated depreciation less
    exemptions:
    accumulated impairment)
    (1) short-term lease – 12 months or less.
    Annual Depreciation = Cost – R.V.
    (2) low value asset – a matter of professional Useful Life
    judgment; no threshold indicated. - (useful life) transfer of ownership/title or
    purchase option (reasonably certain) =
    - use the original cost of the asset as the useful life
    basis for its value (judging low value
    assets), whether it is new or old. - no transfer of title or purchase option =
    useful life vs. lease term (shorter)
    - made on a lease-by-lease basis (individual
    basis) - (residual value) transfer of title or
    purchase option = residual value at the
    - lease payments as an expense in either end of lease term
    straight line basis over the lease term or
    another systematic basis. - no transfer or purchase option =
    guaranteed residual value
    Finance Lease Model for Lessee:
    - other measurement models: (1) fair value
    - lessee is required to initially recognize: model for IP; (2) revaluation model for PPE.
    (1) right-of-use asset – represents the right
    of the lessee to use an underlying asset over
    the lease period. (2) lease liability – obligation to pay

    - non-current asset; can be presented - initial measurement: PV of lease payments;


    separately or part of PPE. using the following rates in order of priority:

    - initial measurement: cost (1) implicit rate – interest rate that cause
    the PV of lease payments and unguaranteed
    PV of Lease Payments XX residual value to be equal to the fair value
    Initial Direct Costs Incurred by of the underlying asset.
    XX
    the Lessee
    Lease Bonus XX (2) incremental borrowing rate – rate of
    Lease Incentives (XX) interest that a lessee would have to pay to
    Estimated Cost of XX borrow over a similar term, and with a
    Dismantling, Removing, and similar security, the funds necessary to
    Restoring the Underlying
    obtain an asset of a similar value to the
    right-of-use asset in a similar economic
    environment.
    Fixed Lease Payments XX
    Variable Lease Payments XX
    Option Price XX
    Guaranteed Residual Value XX
    Termination Penalties XX
    Lease Payments XX

    - subsequent measurement: amortized cost.


    Amortized Cost = CA, beg. – Principal
    Payment (Lease Payment – Interest
    Payment)
    Interest Payment = CA, beg. x Rate

    ▪ lessor – entity that provides the right to use


    an underlying asset.
    Carrying Amount of ROUA XX
    Cash Payments XX
    Total Consideration XX
    Balance of Lease Liability (XX)
    Cost – Purchased Asset XX

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