Operating Lease And Finance Lease - 1307 Words

Introduction What is accounting? Accounting is to saving, arranging, plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses and also records the financial transactions. Accounting also focus on preparing a transparent and general purpose form of financial statement to people outside of the company (What is accounting?), so that the public could easily understand the financial status of a company, but as a new specific accounting standard released the regulations about leasing, things are getting unclear. In this paper I am going to discuss about what are the definition of both operating lease and finance lease, and mainly focus on operating lease due to the majority of companies using this standard. Then find out what makes companies tend to choose the certain leasing standard and also to discover the relationship between them. After that I will discuss how this could affect the investors’ decision, also to discover the benefit that the lessee and lessor might have from the leasing standard. After find out the problem and why it occurred, I will discuss how this issue could be solved and try to find out the solution through the International Accounting Standards Board (IASB). What is the problem? In 2005, IAS 17 was adopted in Australia by Australian Accounting Standard Board (AASB) as AASB 117 (AASB, 2004). There are two types of leases in AASB 117, finance lease and operating lease. Based on the GenerallyShow MoreRelatedQuestions On Finance Lease And Operating Lease Essay894 Words   |  4 Pagesfound from the IAS 17; the lease is defined that â€Å"A lease is an arrangement whereby the lessor coveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time†. (IAS 17, 2003). There are two types of lease: finance lease and operating lease. The following parts will identify them separately and accounting treatments will be discussed in lessees’ and lessors’ aspect. Firstly, it is the finance lease and it is a lease that transfers substantiallyRead MoreCorporate Accounting - Part 1 Lease872 Words   |  4 PagesTHE LEASE. GIVE REASONS FOR YOUR ANSWER. Both Purple Ltd and Lemon Ltd should classify the lease as a finance lease based on the below. Present value of all future lease payments = ($8,000 – $1,000) X 3.8897 = $27,228 Present value of guaranteed residual value = 50% X 7,200 X 0.6499 Total present value = $27,228 + $2,340 of the Bulldozer The present value of the minimum lease payments is substantially all of the fair value of the leased asset at the inception of the lease. Read MoreDiscuss the Concerns Raised by Users Regarding to the Usefulness of Aasb 117744 Words   |  3 PagesAASB 117 Leases requires lessees to classify leases as either finance leases or operating leases. The accounting treatment required under each approach is very different and this has raised concerns by investors and other financial statement users regarding the usefulness of the information provided. This essay will critically discuss and the criticisms and usefulness of lease accounting treatment. It will also examine lessee firm’s responses to Australian Standard 117 Accounting for Leases. DefinitionRead MoreLease Standards Essay1459 Words   |  6 Pagestake in order to be ready for the introduction of the new standards (new lease accounting rules) on January 1st, 2019. As you might know, leasing is a common form of finance for many businesses, especially in sectors like the airline industry, retail, and shipping. The new lease standard represents a change in rents for lessees, which affect all companies and institutions whether it is public, private or not-for-profit that lease assets like real estate; airplanes; boat and construction, office or producingRead MoreLease Of Lease And Operating Lease Essay893 Words   |  4 Pagesfound from the IAS 17; the lease is defined that â€Å"A lease is an arrangement whereby the lessor coveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time†. (IAS 17, 2003). There are two types of lease: finance lease and operating lease. The following parts will identify them separately and accounting treatments will be discussed in lessees’ and lessors’ aspect. Firstly, it is the finance lease and it is a lease that transfers substantiallyRead MoreNew Considerations For Land For Lease954 Words   |  4 PagesNew considerations for land Under the new accounting standards for leases, the right-of-use for the land element in a lease (lease of land and a building) will have a separate lease component from the building. This would not have to be done if it is found that the separation of the two would have insignificant effect on the accounting of the lease (842-10-15-29). Our company currently has leases involving factory buildings, warehouses, and land so this will directly affect us. Impact on the FinancialRead MoreOperating Lease Financing And Financial Performance Of State Owned Sugar Companies Essay973 Words   |  4 PagesOperating Lease financing and financial Performance of State owned sugar manufacturing firms in Kenya Isabwa Harwood Kajirwa1 Omete F. Ikapel2 1,2Department of Business Management, University of Eldoret, P.O. Box 1125-30100, Eldoret, Kenya, Email: harwoodisabwa@yahoo.com Abstract This study analyses the effect of operating lease finance on financial performance of state owned sugar firms in Kenya. The study used the retrospective research design in collection of data. A target population ofRead MoreThe International Accounting Standards Board1662 Words   |  7 Pagespurchases of leases. The joint effort of the two has finally come to an end, with the new standards being issued out on February 25, 2016. These new standards will come into effect starting in 2019. It is important that our diversified company begins preparing for the major implications of these new standards and fully understand what we are dealing with. The Accounting Standards Update No. 2016-02, Leases (Topic 842) will have an immediate effect on our company because is involved in many lease-relatedRead MoreThe Financial Accounting Standards Board Essay937 Words   |  4 Pagesto the new procedures. Leases are part of a Joint Project that is undergoing convergence due to reporting differen ces between US GAAP and IFRS; that consist of revisions to the standards and clarification of its new terms, which will impact the manner US companies report leases in financial statements. Leases are part of a Joint Project that is undergoing convergence due to reporting differences between US GAAP and IFRS. Leases make up a major part of businesses that lease equipment such as carsRead MoreWhat Does This Change Mean For 7 Twenty Stores? Essay1292 Words   |  6 Pagesthought to be most affected industry from changes in accounting for leases. At the moment most of the retail leases in the company are treated as operating lease. Changes in the lease treatment means retail companies will no longer be able to expense those leases rather have to capitalise it on balance sheet as asset and liability. Retailers like 7 eleven will book a â€Å"right-of-use† (ROU) in assets and present value of future lease payments in liabilities, inflating both the sides of the balance sheet