Quizzes on Accounting , Exercises of Accounting

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LEASES PERS 4b Basic Concepts ‘Lease - Acontract that conveys the right fo use an acsee fo another party in exchange for a concideration Parties: Lessor Right to ure —_——__— Lessee fee] consideration Right to Contre, the Use of The Asset The entity (customer) has the vight if: (both) V Tight fo obtain SUbctantially al of the economic benefits — by having exclusive use Vv - Fight to divect how and for what purpose Identified Asset — Tequivement for contract Of Itace fo evict — if explicitly Jimplicitiy specified Porhont of Assets - asset is identified if it ts physically dictiner # Substanive Substtmtion Rights — asset is NoT identified if the Supplier has such vight Lease Term ~ Non-cancellable - IWcludes. V option to extend — if lescee is veasonably certain to exercise Such option V Option fo terminate - if lessee is reasonably certain NOT to exercise Such option ACCOUNTING FOR LEASES — LESSEE Types of Leases 4. Operating Leace — (normal rent) I> Short-term Ieace OPTIONAL - 12 months or lecs XPNS - provided, N0 purchase option I> Low-value lease - bated on prfeccional judqment - based on value when it is new GR:—2- Finance Lease | Capital leace ———————________——-> lessees perspective: Form: Lease Dr. Right-oF-Uce Asset XX Substance: Purchate Of an asset in installment Cy. Lease Liability xx Measuvement of Lease Liability |nifial measure ment: @ PV of Lease Payments Fixed lease payments (net of ieate incentives) Variable leas payments Guaranteed vesidual value Purchase option Penalties Discount rate: © Implicit rate @ Incremental Borvowing rate Suloceqnent Measwremenr: Amortized Cost