1. a) Provide the definition of a lease and describethe two types of leases.b) How has IFRS 16 changed for lessees andlessors in relation to distinguishing between thetwo types of leases?c) Identify five practical expedients andexemptions allowed in IFRS 16 and describe howthey are used.d) List the five criteria under IFRS 16 fordetermining if a lease is finance lease.

1.a) Definition of lease : Lease is defined as the financial agreement between two parties i.e., one…

Answered: 1. a) Provide the definition of a lease…

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1. a) Provide the definition of a lease and describe the two types of leases.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 13GI: What is the basic difference between the accounting procedures used by a lessor for a sales-type...

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

1. a) Provide the definition of a lease and describe
the two types of leases.
b) How has IFRS 16 changed for lessees and
lessors in relation to distinguishing between the
two types of leases?
c) Identify five practical expedients and
exemptions allowed in IFRS 16 and describe how
they are used.
d) List the five criteria under IFRS 16 for
determining if a lease is finance lease.

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Which of the following statements is correct related to lease? a. The leased asset is depreciated over the asset's useful life or lease term whichever is higher. b. The leased asset is depreciated over the asset's useful life. c. The leased asset is recorded using the higher amount between fair value of the asset and present value of the minimum lease payments. d. Under IFRS 16 a lease is defined as ‘a contract that conveys the right to use an asset for a period of time in exchange for consideration'.
Which of the following statements is correct in accordance with AASB 16 Leases? Group of answer choices A lease contract, or part of a lease contract, conveys the right to transfer ownership of an asset for a period of time in exchange for consideration. Payments that are made by a lessee at commencement date are included in the initial amount recognised for the lease liability. Payment for executory costs reimbursed by the lessee after being paid by the lessor on behalf of the lessee are included in the calculation of lease payments. Variable lease payments may be increased or decreased during the lease term because of changes in facts and circumstances occurring after the asset is made available to the lessee to use, other than the passage of time.
D6) Describe the criteria that the lessee must utilize when determining whether a lease is to be treated as a finance lease or as an operating lease according to ASC 842. Original answer.
If the lease in a sale-leaseback transaction meets one of the five lease tests and is therefore accounted for as a finance lease, who records the asset on its books and which party records interest expense during the lease period? Party recording theasset on its books Party recordinginterest expense Seller-lessee Purchaser-lessor Purchaser-lessor Purchaser-lessor Seller-lessee Seller-lessee Purchaser-lessor Seller-lessee
please answer
A lessee should classify a lease transaction as a finance lease if it is noncancelable and one or more of fiveclassification criteria are met. Otherwise, it is an operating lease. What are these criteria?
The objective of IAS 17 Leases is to prescribe the appropriate accounting treatment and required disclosures in relation to leases. Which TWO of the following situations would normally lead to a lease being classified as a finance lease? (1) The lease transfers ownership of the asset to the lessee by the end of the lease term. (ii) The lease term is for approximately half of the economic life of the asset. (iii) The lease assets are of a specialised nature such that only the lessee can use them without major modifications being made. (iv) At the inception of the lease, the present value of the minimum lease payments is 60% of what the leased asset would cost to purchase. Select one: O a. (ii) and (iii) O b. (i) and (iii) c. (i) and (ii) O d. (iii) and (iv)
Which of the following are normal characteristics of a financial lease? I. Maintenance of the leased asset is the responsibility of the lessee. II. The lease is generally cancellable by the lessee prior to the expiration date. III. Financial leases are generally fully amortized. IV. The lessee usually has the right to renew the lease at the end of the initial lease period. Select one: O a. I, II, III, and IV O b. I, II, and IV only O c. II, II, and IV only O d. I and Il only Oe. I and II only
Leases are governed by FASB 13 whose general purposes are to: I.outline the accounting and tax aspects of a financial lease arrangement. II. outline the accounting and tax aspects of a sale and leaseback arrangement. II. set forth both the tax and legal responsibilities of lessors. IV. set forth the criteria of an operating lease and require that operating leases be recorded on the balance sheet. V. set forth the criteria of a capital lease and require that capital leases be recorded on the balance sheet. Select one: O a. V only O b. IV AND V only O . Tonly O d. I, Il and IIl only O e. I and V only
At the beginning of a Type B lease, the lessor will record what asset and liability, if any?
AASB 16/IFRS 16 defines a lease as: Select one: A. a contract, or part of a contract, that conveys the right to transfer a liability for a period of time in exchange for an asset. B. a contract that conveys the right for the lessor to obtain substantially all of the economic benefits of the identified asset. C. a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. D. a contract, or part of a contract, that conveys the right to transfer ownership of an asset (the underlying asset) for a period of time in exchange for consideration.
(Comparison of Different Types of Accounting by Lessee and Lessor)Part 1: Capital leases and operating leases are the two classifications of leases described in FASB pronouncements from the standpoint of the lessee.Instructions(a) Describe how a capital lease would be accounted for by the lessee both at the inception of the lease and during the first year of the lease, assuming the lease transfers ownership of the property to the lessee by the end of the lease.(b) Describe how an operating lease would be accounted for by the lessee both at the inception of the lease and during the first year of the lease, assuming equal monthly payments are made by the lessee at the beginning of each month of the lease. Describe the change in accounting, if any, when rental payments are not made on a straight-line basis.Do not discuss the criteria for distinguishing between capital leases and operating leases.Part 2: Sales-type leases and direct-financing leases are two of the classifications of leases…