leases march 8, 2011 jody grewal, kieng iv, lisa ryerson, may leung

Leases March 8, 2011

Jody Grewal, Kieng Iv,

Lisa Ryerson, May Leung

AGENDA

• Lessee (Classification, Accounting, Disclosures)• Lessor (Classification, Accounting, Disclosures)

• Sales and Leaseback• Impairment• Classification Changes• IFRIC 4/ SIC 27• Exposure Draft• Financial Statements Example

2

What is a lease?

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. (IFRS)

Lease is the conveyance, by a lessor to a lessee, of the right to use a tangible asset, usually for a specified period of time in return for rent. (ASPE)

LEASE DEFINITION

LESSEE PERSPECTIVE

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Substantially all of the rewards and risks of ownership have been transferred to the lessee when ONE of the following 3 tests is met:

• Test #1: Ownership test – Is there a transfer of ownership at the end of the lease term or a bargain purchase option?

• Test #2: Economic life test – Is the lease term ≥75% of the leased asset’s economic life?

• Test #3: Fair Value test - Is the PV of the minimum lease payments ≥90% of the leased asset’s fair value?

• “Yes” to any of the above: Capital Lease

• “No” to all of the above: Operating Lease

Lessee Classification:Capital or Operating Lease (ASPE 3065)

Explanation of terms:

• Rewards of ownership: expectation of profits and gain from appreciation of value of the leased asset

• Risks of ownership: possibilities of losses from idle capacity or obsolescence of the leased asset

• Bargain purchase option: allows lessee to purchase leased property for a price sufficiently lower than FV

• Economic Life: remaining period during which the property is expected to be economically usable

• Minimum Lease payments: Minimum rental payments+ Guaranteed residual value + Penalty for not renewing or extending lease + Bargain purchase option

• Minimum rental payments: Regular payment to lessor, excluding executory costs (insurance, maintenance, tax)

Lessee Classification:Capital or Operating Lease (ASPE 3065) (cont’d)

Substantially all of the rewards and risks of ownership have been transferred to the lessee when ONE of the following 4 tests is met:

• Test #1: Ownership test – Is there a transfer of ownership at the end of the lease term or a bargain purchase option? (same as ASPE)

• Test #2: Economic life test – Is the lease term a Major Portion of the leased asset’s economic life? (no quantitative threshold, ASPE specifically states at least 75%)

• Test #3: Fair Value test – Do the PV of the minimum lease payments cover substantially all of the FV of the leased asset? (no quantitative threshold, ASPE specifically states at least 90%)

• Test #4 (additional IFRS test): Specialized asset test – Are the leased assets of such a specialized nature that only the lessee can use them without major modifications? (no equivalent ASPE test)

• “Yes” to any of the above: Finance Lease (Capital under ASPE)

• “No” to all of the above: Operating Lease

Lessee Classification:Finance or Operating Lease (IAS 17)

Lessee: Operating Lease Treatment

IAS 17 ASPE 3065

Lease Payments

Expensed on a straight-line basis unless another systematic basis is more representative

Expensed on a straight-line basis unless another systematic basis is more representative

Renegotiation No specific guidance Continue to account for as the original lease until the original lease term expires

When the lease term expires, account for using the new lease terms.


IAS 17 ASPE 3065

Incentives Recognize aggregate benefit as a reduction of rental expense over lease term

Reduces the lease expense over the lease term

Costs Incurred

In accordance with applicable standard(SIC 15)Includes costs effectively reimbursed through an incentive agreement(SIC 15)

No specific guidance

Residual Value Guarantee

No specific guidance Included in lease payments when likely guarantee will be required


IAS 17 ASPE 3065

Disclosures • Total future minimum lease payments for non-cancellable leases for each period

• Less than a year• 1-5 years• Over 5 years

• Total future minimum sublease payments expected to be received

• Lease/sublease payments expensed in the year

• General description of significant lease arrangements

• Future minimum lease payments

• Aggregate• For each of the next 5

years• Nature of other

commitments under leases

• Exception:• Leases with an initial

lease term of a year or less

IAS 17 ASPE 3065

Recognition Amount

Lower of:a) Fair Value of Leased Asset;

orb) Present Value of Minimum

Lease Payment

Present Value of Minimum Lease Payment excluding executory cost but cannot exceed the fair value of the leased asset

Discount Rate If practical, use implicit interest rate and if not practical use incremental borrowing rate

Lower of: a) Implicit Interest

Rateb) Incremental

Borrowing Rate

Differences •The discount rate may be different under IFRS than ASPE because ASPE uses lower of the implicit and the borrowing rate while IFRS uses the implicit rate if it is practical to calculate

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Lessee: Capital and Finance Lease Treatment

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Lessee: Capital and Finance Lease TreatmentIAS 17 ASPE 3065

Allocation of Lease Payment

First allocate to interest income by applying discount rate by outstanding liability at beginning of period then the rest to the reduction of the liability

Allocate to executory cost, interest expense and reduction in outstanding liability.Interest expense is calculated by applying the discount rate to the outstanding liability.

Contingent Rent Expensed Same as IAS 17

Direct Cost Treatment Costs directly attributable with specific leasing activities are added to the asset

No guidance provided

Differences •Executory cost reduce the lease payment and no guidance is provided for direct cost treatment for ASPE

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IAS 17 ASPE 3065Depreciation Same as guidance provided

under IAS 16 and IAS 38 If lessee will not obtain ownership then depreciate over the shorter of the lease term and useful life

Same as guidance provided under 3061Depreciate over lease term unless there is a term to pass ownership to lessee or a bargain purchase option exists. If either exists, amortize over economic life

Presentation Statement of Financial Position Asset Liability

Present as: Asset – separate from

assets owned Liabilities – separate from

other long-term liabilities Lease obligations payable

within a year should be classified as current liability

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IAS 17 ASPE 3065

Disclosure • Each class: the net carrying amount, reconciliation between the total of future minimum lease payments and their PV

• Disclose the total of future minimum lease payments, and their PV

• Contingent rents recognized as an expense, the total of future minimum sublease payments

• General description of significant leasing arrangements

Cost Accumulated amortization

and amortization method used

Interest rate Maturity date Amount outstanding If the leases are secured

Difference •Depreciation could be different if the useful life is less than the lease life•Presentation guidance is more descriptive for ASPE•Disclosure requirements are different

ABC Corp leased a truck with an economic life of 7 years on January 1, 2010 from Truck Corp. The yearly rental is $5,582.62 due at the start of the year, for 3 years and the fair value of the truck is $20,000. There is no purchase option but the residual value at the end of the lease (guaranteed) is $7,000. The truck has been designed specifically for the use of the lessee. The incremental borrowing rate of the lessee is 10%, and the implicit rate of the lessor is 12%.

How should the lease be classified by the lessee (ABC Corp) under IFRS?

Test #1 – Ownership test:

No, since there is no transfer of title and no bargain purchase option

Test #2 – Economic life test:

No, since the lease term is 3 years and the truck’s economic life is 7 years, which not a major portion (not even half)

Test #3 – FV test / Recovery of investment test:

Yes, since the minimum lease payments’ PV is substantially all of the FV of the leased asset. (see next slide)

Card Question #1

Rental payments $5,582.62

PV factor for an annuity due, 3 years at 12% x2.69

PV of rental payments 15,017.54

PV of guaranteed residual value:$7K(PVF n=3, y=12%) = $7K(0.71178) = 4,982.46

PV of minimum lease payments 20,000

FV of lease asset 20,000

Test #4 (not necessary because Test #3 is passed) – Specialization test:

Yes, the truck has been designed specifically for ABC Corp, who will not have to make major modifications to it

Conclusion?

Finance lease

What is the entry to record the lease by ABC Corp (lessee) on Jan 1, 2010?• Dr. Leased Asset – Truck 20,000• Cr. Obligation under Finance Lease 20,000

Card Question #1 (cont’d)

Test #3

LESSOR PERSPECTIVE

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From the lessor’s point of view, use the following tests to determine if the lease transfers substantially all of the benefits and risks of ownership to the lessee:

• Test #1: Are any of the lessee’s capital lease criteria met?• Test #2: Is the credit risk associated with the lease normal?• Test #3: Are the unreimbursable costs to the lessor estimable?

“No” to any of the above results in Operating Lease classification

“Yes” to all three of the above leads to Test #4:

• Test #4: Does the leased asset value equal the lessor’s book value?

If “yes”, classification is direct finance lease,

If “no”, classify as sales-type lease

Lessor Classification:Sales-Type, Direct Financing or Operating lease (ASPE & IFRS)

Test #2 guidance: When considering collection risk associated with the lease, compare it to that of similar receivables

Test #3 guidance: If costs to lessor are not estimable, the lessor may retain substantial risks associated with the leased asset

• N.B. A Lease can be a capital lease to the lessee but an operating lease to the lessor

• N.B. A Lease that is an operating lease to the lessee will always be an operating lease to the lessor (fails Test #1)

Lessor Classification:Sales-Type, Direct Financing or Operating lease (ASPE & IFRS) (cont’d)

ASPE & IFRS differences

Test #4 Guidance: ASPE specifies that if the lessor is a manufacturer/dealor and tests #1-3 are met, classification is likely a Sales-Type

ASPE specifies that if the lessor is primarily involved in financing activities and tests #1-3 are met, classification is likely Direct Financing

IFRS focuses on the economic substance of the lease, rather than ‘bright lines’ or specific guidance

Lessor Classification:Sales-Type, Direct Financing or Operating lease (ASPE & IFRS)

• Lease classification made at inception of the lease

• Changes in estimates (economic life/residual value of leased asset) do not result in a new classification

• Changes in provisions, renewal/extension considered a new lease and may result in new classification

Classification: Issues for both Lessees & Lessors

Lessor: Operating Lease Treatment

IAS 17 ASPE 3065

Asset Recorded according to its nature


Income Recognized on a straight-line basis over the lease term unless a more systematic basis is more representative of the time pattern of which the benefit derived from the asset is diminished.

Recognized on a straight-line basis over the lease term unless a systematic basis is more representative

Expenses Costs are recognized as an expense in the period incurred



IAS 17 ASPE 3065

Initial Direct Costs

Added to the carrying amount of the leased asset

Deferred and amortized over the lease term in proportion to the recognition of income

Depreciation Refer to IAS 16 & 38 No specific guidance

Dealor Lessor No recognition of selling profit because an operating lease is not the equivalent of a sale



IAS 17 ASPE 3065

Incentives Aggregate cost recognized as a reduction of rental income over the lease term (SIC 15)

Treated the same as initial direct costs

Disclosures • Total future minimum lease payments for non-cancellable leases for each period

• Less than a year• 1-5 years• Over 5 years

• Total contingent rents recognized as income

• General description of the lease arrangements

• Cost of PP&E held for leasing purchases

• Accumulated amortization

• Carrying amount of impaired lease receivables

• Amount of any related allowance for impairment

• Company A enters into a 2- year lease with Company B

• Payments:• Yr 1: $2,000/month• Yr 2: $1,000/month• Total = $36,000

• What are the journal entries under IFRS for the first month?

• For Company A• For Company B

Card Question 2

LESSEE:

Dr. Rent expense $1,500

Dr.Prepaid rent$500

Cr. Cash $2,000

LESSOR:

Dr.Cash $2,000

Cr. Rent revenue $1,500

Cr. Unearned rent revenue $500

Card Question 2

• A lessor can assign lease payments to a 3rd party

• Transaction is accounted for as a secured loan by both parties when:

• Guarantee exists that ensures 3rd party’s investment will be recovered

• 3rd party looks to lessor to recover (rather than the property)

• Lessor retains substantial risks of ownership

Lessor: Third-Party ParticipationASPE 3065.57-.60

• When the property is sold, lessor records proceeds of sale as a loan

• Interest rate is that of a similar loan under such conditions

• Until the loan is paid, lessor records:• Lease payments as revenue• Interest expense as an appropriate portion of each

rental payment with the remainder reducing the amount of the loan

LESSOR: Third-Party ParticipationASPE 3065.57-.60

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Lessor –Finance LeaseManufacturer or Dealer Other

Income Types Finance Income• Recognized using the implicit rate

after recognizing an equal amount of finance income to offset initial direct costs incurred in the period

Profit or Loss• PV of minimum lease payments or

fair value less (carrying cost less unguaranteed residual value)

Finance Income• Constant rate of return


Initial direct costs are added to the net investment and recognized over the term• Except negotiating and arranging

costs

Included in the initial measurement of finance income receivable through implicit interest rate

Residual Value Reviewed regularlyIf reduction in value:• Change accounting using new

estimate• The reduction in net investment is

charged to income

Same as manufacturer or dealer

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Lessor –Finance Lease

Manufacturer or Dealer OtherPresentation Receivable equal to the net

investmentSame as manufacturer or dealer

Disclosure In addition to IFRS 7:• Reconciliation between

gross investment and the PV of receivables

• Total contingent rents recognized as income during the period

• General description of leasing arrangements

• Gross investment and the PV of min lease payments

In addition to IFRS 7:• Reconciliation between

gross investment and the PV of receivables

• Total contingent rents recognized as income during the period

• General description of leasing arrangements

• Gross investment and the PV of min lease payments

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Lessor – Direct Financing and Sales-type Lease

Direct Financing Sales-TypeLessor Role

Financial intermediate Manufacturer or dealer

Income Types

Finance Income•Recognized at a constant rate except initial direct expenses

Profit or Loss

Finance Income•Recognized at a constant rate

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Direct Financing Sales-TypeInitial and continuing investment

• Minimum lease payments receivable less any executory costs and related profit therein;

• The unguaranteed residual value of the lease property accruing to the lessor;

• Unearned finance income, after deducting initial direct costs, remaining to be allocated to income over the lease term;

• The investment tax credit remaining to be allocated to income over the lease term; and

• Future income taxes as a result of the lease, when predictable with reasonable assurance

Same as Direct Financing


Expensed as incurred and portion of unearned income is recognized

Expensed at inception of lease

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Direct Financing Sales-TypeResidual Value

Reviewed annualIf decline:• change accounting using new

estimate• The reduction in net

investment is charged to income

• An upward adjustment is not made

• Same as Direct Financing

Presentation • Net investment is shown separate from other assets.

• Net investment shall be segregated between current and long-term portions in a classified balance sheet


Disclosures • Net investment and implicit interest rate


In addition to the facts in Card Question #2, assume that the credit risk of the lease is normal, unreimbursable costs to the lessor are $1,345 and the truck is sitting on the lessor’s books at $15,000.

How should Truck Corp. classify the lease under ASPE?

Test 1: Are any of the Lessee’s capital lease criteria met?• Yes, based on card question #1 answer

Test 2:Is the credit risk associated with the lease normal?• Yes, the credit risk of the lease is normal

Test 3: Are the unreimbursable costs to the lessor estimable?• Yes, unreimbursable costs to the lessor are $1,345

Test 4: Does Leased Asset Value = Lessor’s Book Value?• No, Book Value is $15,000 and the Fair Value is $20,000 according to Card Question

#2

Conclusion?

Sales-Type Lease

Card Question #3

What are the entries to record the lease on Truck Corp.’s books?

• Dr. Lease Payments receivable 23,747.86*• Dr. Cost of Goods Sold 15,000• Cr. Inventory-Truck

15,000• Cr. Sales

20,000• Cr. Unearned interest income

3,747.86

*(3*5,582.62+7,000)

Card Question #3 (cont’d)

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Sale and Leaseback Transaction – IAS 17A sale and leaseback transaction involves the sale of an asset and the leasing back of the same asset. The lease payment and the sale price are usually interdependent because they are negotiated as a package

Disclosures: Provisions of agreement or terms of sale leaseback agreement

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Sale and Leaseback Transaction – ASPE 3065When there is interdependence between the sales and lease terms and inability to separate the sale and lease, it is a sale-leaseback transaction.Exception: When the leaseback is of a portion remaining use of the property sold, it may be possible to separate the accounting aspects of the sale and the lease. (i.e. one floor of an tower, or lease is three years of a ten year useful life).

Disclosure: No guidance provided

IAS 17:• In accordance with IAS 36ASPE 3065:• Indication of impairment?• Carrying amount reduced to the greater of:

• PV of future cash flows• Amount realizable by selling the lease at the beginning

of the period• Amount realizable by exercising rights to the property

(net of costs to exercise those rights)

• Impairment can be reversed if circumstances change

• Recognized in net income

Impairment of Lease Receivables

When to use IFRIC 4? When Not to use IFRIC 4?When an entity enters into an arrangement of transaction(s) not in the legal form of a lease but it conveys a right to use an asset for a series of payments. Helps:(a) determining whether it is a lease,(b) when assessment or reassessment of arrangement should be made, and (c) how payments for the lease should be separated from other elements

When it relates to arrangements specifically excluded in IAS 17 or public-to-private service concession arrangements under IFRIC 12.

IFRIC 4: Determining Whether An Arrangement Contains a Lease

Does the Arrangement Contain a Lease?

Is fulfillment of the arrangement dependent on use of specific asset(s)?

Does it convey right to use asset? One of:• Right to operate in desired manner and control more

than insignificant amount of output· Right to control physical asset and controls more than

insignificant amount of output· Other parties cannot take more than an insignificant

amount of output during term and price paid by purchaser per unit is not fixed or equal to market price

Not Lease

Lease

YesNoNo

Yes

Assessment date should be the same as IAS 17. A reassessment after the inception of the arrangement is made only if any one of the following conditions is met (using facts as of date of assessment):

• There is a change in the contractual terms, unless the change only renews or extends the arrangement.

• A renewal option is exercised or an extension is agreed to by the parties, (where renewal/extension was not included in lease term. A renewal/extension of the arrangement with no modification of terms shall be evaluated under Topic A only with respect to the renewal or extension period.

• There is a change in the determination of whether fulfillment is dependent on a specified asset.

• There is a substantial change to the asset

When should assessment/reassessment take place?

How Should Payments Be Accounted For?

Is it practical to separate payments for lease and other elements?

Estimate lease payments with leases with comparable assets,

OREstimate other elements with comparable arrangements and deduct from total

If finance Lease: recognize an asset and a liability at an amount equal to the fair value of the underlying asset. The liability is to be reduced as payments are made and an imputed finance charge on the liability recognized using the purchaser's incremental borrowing rate of interest. If operating Lease: treat all payments under the arrangement as lease payments but-disclose those payments separately from minimum lease payments of other arrangements that do not include payments for non-lease elements, and-state that the disclosed payments also include payments for non-lease elements in the arrangement.

NoYes

• When an Entity entered into a transaction or an arrangement with unrelated party/parties (an Investor) that involves the legal form of a lease, SIC 27 will provide guidance on:

• (a)how to determine whether a series of transactions is linked and should be accounted for as one transaction;

• (b)whether the arrangement meets the definition of a lease under IAS 17; and, if not,– (i)whether a separate investment account and lease payment

obligations that might exist represent assets and liabilities of the Entity

– (ii)how the Entity should account for other obligations resulting from the arrangement; and

– (iii)how the Entity should account for a fee it might receive from an Investor.

SIC 27 Interpretation: Evaluating the substance of transactions involving the legal form of a lease

• Treated as one transaction when: A series of transactions that involve the legal form of a lease is linked and the overall economic effect cannot be understood without reference to the series of transactions as a whole.

• If one transaction: Accounting needs to reflect the substance of the arrangement and all aspects needs to be evaluated, with weight given to those aspects that have an economic effect.

Whether it is a transaction:

Indicators that individually demonstrate that an arrangement may not involve a lease under IAS 17 include:

• (a)Entity retains all the risks and rewards incident to ownership of an underlying asset and enjoys substantially the same rights to its use as before the arrangement;

• (b) the primary reason for the arrangement is to achieve a particular tax result, and not to convey the right to use an asset; and

• (c) an option is included on terms that make its exercise almost certain

Is Arrangement a Lease?

Indicators that collectively demonstrate that a separate investment account and lease payment obligations do not meet the definitions of an asset and a liability and shall not be recognised by the Entity include:

• Entity not able to control the investment account for own objectives and is not obligated to pay the lease payments.

• the Entity has only a remote risk of reimbursing the entire amount of any fee received from an Investor and possibly paying some additional amount, or, when a fee has not been received, only a remote risk of paying an amount under other obligations and

• (c) other than the initial cash flows at inception of the arrangement, the only cash flows expected under the arrangement are the lease payments that are satisfied solely from funds withdrawn from the separate investment account established with the initial cash flows.

If not a Lease:

Indicators that individually demonstrate that recognition of the entire fee as income when received, if received at the beginning of the arrangement, is inappropriate include:

• (a) obligations either to perform or to refrain from certain significant activities are conditions of earning the fee, and therefore execution of a legally binding arrangement is not the most significant act;

• (b)limitations are put on the use of the asset that have the practical effect of restricting the ability to use the asset;

• c)the possibility of reimbursing any amount the fee and paying some additional amount is not remote.

• The fee shall be presented in the statement of comprehensive income based on its economic substance and nature.

If not a Lease:

Exposure Draft:Existing models require classification into finance or operating lease, leading to

lack of comparability due to clear distinction between the two. In the future, guidance is moving towards all leases being classified as capital/finance.

Main Proposal:• Lessee: recognize asset representing rights to use leased term and liability

to make payments.• Lessor: recognize its right to receive lease payments and would either i)

recognize a lease liability while continuing to recognize the underlying asset or ii) derecognize the rights in the underlying asset.

• Assets and liabilities are recognized as the longest possible lease term that is more likely than unlikely, using an expected outcome technique to reflect the lease payments, and updated when there are changes in facts that make it significantly different from prior period.

• Changes for Lessees: If they currently account for it as operating leases (recognize under the current period), they will be required to recognize the assets and liabilities under proposal.

• Changes for Lessor: accounting is very different - will be either derecognized or recognize asset and liability for underlying asset

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WESTJET• Quarterly Report :

http://www.westjet.com/pdf/investorMedia/financialReports/westjet-2010-q3-financial-statements.pdf

• Annual Report 2009 : http://www.westjet.com/pdf/investorMedia/financialReports/WestJet2009AR_financialReport.pdf

REAL EXAMPLES OF FINANCIAL STATEMENTS





http://www.westjet.com/pdf/investorMedia/financialReports/WestJet2009AR_financialReport.pdf



No. Under ASPE, this condition alone is not sufficient evidence that substantially all the benefits and risks of ownership have been transferred to the lessee, because, in all leasing agreements, lessee either directly or indirectly pays for these costs.

The Terms of the Lease Are Right!

LESSEE VS LESSOR

Which of the following is not a test of lease capitalization, under ASPE and IFRS?

A) If the implicit interest rate used to calculate the lease payment < incremental borrowing rate

B) If the PV of minimum lease payments covers substantially all of the FV of the leased asset

C) If the lease term is ≥75% of the leased property’s economic life

D) If the leased assets need to be modified in order to be usable by someone other than the lessee

Why must the remaining unreimburseable costs to the lessor be estimable in order for the lessor to classify the lease as a Sales-Type or Direct Financing lease?

If such costs are not reasonably estimable, the lessor may retain substantial risks in connection with the leased property. Since substantially all of the risks and rewards of ownership have not been transferred to the lessee, the lessor classified the lease as an Operating lease.

Subsequent to lease inception, which of the following changes will always result in the lease classification being changed?

A) Change in realizable value of the leased property

B) Change in economic life of the leased property

C) Change in provisions, renewals or extensions of the lease

D) All of the above

E) None of the above

Relating to Lessee Perspective : Contingent rent is treated differently under ASPE than IFRS?

A) True

B) False

C) It Depends

Relating to Lessee Perspective : Under IAS 17, the amount that should be recognized as an asset and liability at inception of the finance lease is:

A) Fair value if Fair Value > PV of Min Lease Payments

B) PV of Min Lease Payments if Fair Value > PV of Min Lease Payments

C) Undiscounted lease payments

D) None of the above

From the Lessor’s Perspective: What are the different types of incomes for a manufacturer or dealer under IFRS?

A) Profit or Loss

B) Finance

C) Rental Income

D) A and B

E) All of the above

Under IFRS, for a lessor, the receivable is equal to?

A) Net Investment

B) Undiscounted lease payments

C) Discounted lease payments

D) Undiscounted lease payments less direct costs

Under IAS 17, for a sale and leaseback transaction where the lease is classified as an operating lease and the sales price is equal to the fair value of the leased asset:

A) Defer profit or loss and amortize over useful life

B) Defer profit or loss and amortize over lease term

C) Recognize gain or loss immediately in the P&L

D) None of the above

Under IFRIC 4: Which of the following factors do not convey a right to use the asset?

A) Right to control physical and controls more than insignificant amount of output

B) Right to operate in desired manner and control more than insignificant amount of output

C) Other parties cannot take more than an insignificant amount of output during term and price paid by purchaser per unit is fixed or equal to market price

If a dealor lessor engages in an operating lease, how is the selling profit on the lease calculated?

Trick Question! There is no selling profit because an operating lease is not the equivalent of a sale.

What is the journal entry for a lessee for a lease payment under an operating lease?

Word Bank: Lease expense, Revenue, Cash, Amortization of lease payment, Deferred lease payment

Dr. Lease expenseCr. Cash

References for Power Point

Weidman, C. (2010). ACC 611 / AFM 504. Waterloo, Ontario, Canada.

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Questions?

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leases march 8, 2011 jody grewal, kieng iv, lisa ryerson, may leung

Documents

lease term

capital lease

operating lease aspe

ownership test

ifrs lease

aspe lease definition

operating lease ias

finance lease capital