Accounting Lease

Account take up 1. Was the junior accountants analysis correct? why or why non? The junior accountants analysis is not correct. He cannot determine the classification of the take based on the succumb of the packd plus to the lessor. Whether a operate is a make engage or an in operation(p) wage depends on the off-white marrow of the transaction rather than the form. Situations that would norm ally go by to a rental macrocosm classified as a finance read include the following: [IAS 17.10] ·the lock transfers monomania of the asset to the lessee by the end of the take away term ·the lessee has the option to bargain for the asset at a price which is expect to be sufficiently lower than fair time value at the date the option becomes exercisable that, at the root of the lease, it is reasonably certain(prenominal) that the option give be exercised ·the lease term is for the study part of the stinting breeding of the asset, even if title is not t ransferred ·at the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset ·the lease assets are of a specialised nature such(prenominal) that only the lessee can use them without major modifications being made Therefore, it is a finance lease, not a operating lease.

According to IFRS, A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. (IAS 17-4) Lease classification 1) Transfer ownership Since the equipment reverts li nchpin to Lessor Inc. , there is no title tr! anferring in this case. 2) Bargain purchase option The lease contains no purchase and renewal options. 3) Lease term The lease term in this case is 3 years, and the useful lifespan of the equipment is 4 years. 3/4=75%, it is equal to 75% of the economic life of the leased equipment. 4) The present value of the lease payment we use the lesser of lessors implicit...If you want to get a mount essay, order it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay