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1、Leases15McGraw-Hill/IrwinCopyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.15 - 2Accounting by the Lessor and LesseeLessor = Owner of propertyLessee = Renter15 - 3Capital Leases and Installment Notes ComparedMatrix, Inc. acquires equipment from Apex, Inc. by paying $193,878 every
2、 six months for the next three years. The interest rate associated with the agreement is 9%. Lets look at the arrangement as an installment note payable and as a capital lease agreement. First, lets prepare an amortization schedule for the payments.15 - 4Inception of the AgreementAt inception Januar
3、y 1Installment NoteEquipment1,000,000Notes payable 1,000,000Capital LeaseLeased Equipment1,000,000Lease payable 1,000,000First payment, June 30Installment NoteInterest expense 45,000Notes payable 148,878Cash 193,878Capital LeaseInterest expense 45,000Lease payable 148,878Cash 193,87815 - 5Classifica
4、tion Criteriatransfersbargain purchase option 75% or more 90% or more of the fair value A must meet of four criteria:Operating LeaseCapital Lease15 - 6Classification Criteria15 - 7Additional Lessor Conditions The four conditions discussed apply to both the lessee and lessor. However, the lessor must
5、 meet two additional conditions for the lease to be classified as either a direct financing or sales-type lease:1. The collectibility of the lease payments must be reasonably predictable.2. If any costs to the lessor have yet to be incurred, they are reasonably predictable. Performance by the lessor
6、 is substantially complete.15 - 8U. S. GAAP vs. IFRSLease classification rules.1.Same as IFRS.2.75% or more of assets life.3.“Substantially all means 90% or more.4.Title transfers.Lease accounting under U.S. GAAP and IFRS provides a good general comparison of “rules-based accounting” as U.S. GAAP of
7、ten is described and “principles-basedaccounting” which often is the description assigned to IFRS.Situations that normally would lead to classification as a finance lease are:1. Contains a BPO2. Term is “major portion” of assets life.3. PV of MLP greater than “substantially all” of the fair value of
8、 the asset.4. Other circumstances impact classification.15 - 9Operating LeasesCapitalLease15 - 10Operating LeasesOn January 1, 2011, Sans Serif Publishers, Inc., a computer services and printing firm, leased a color copier from CompuDec Corporation.The lease agreement specifies four annual payments
9、of $100,000 beginning January 1, 2011, the inception of the lease, and at each January 1 thereafter through 2014.The useful life of the copier is estimated to be six years. Before deciding to lease, Sans Serif considered purchasing the copier for its cash price of $479,079. If funds were borrowed to
10、 buy the copier, the interest rate would have been 10%.San Serif Publishers, Inc. (Lessee)Prepaid rent100,000Cash 100,000CompuDec Corporation (Lessor)Cash100,000Unearned rent revenue 100,000At End of the Four Payment Dates15 - 11Leasehold ImprovementsSometimes a lessee will make improvements to leas
11、ed property that reverts back to the lessor at the end of the lease. Like other assets, leasehold improvement costs are allocated as depreciation expense over its useful life to the lessee, which is to be the shorter of the physical life of the asset or the lease term.15 - 12Capital Leases Lessee an
12、d Lessor15 - 13Capital Leases Lessee and Lessee15 - 14Capital Leases Lessee and LessorOn January 1, 2011, Sans Serif Publishers, Inc., leased a copier from First Lease Corp. First Lease purchased the equipment from CompuDec Corporation at a cost of $479,079.The lease agreement specifies annual payme
13、nts beginning January 1, 2011, the inception of the lease, and at each December 31 thereafter through 2015.The six year lease term ending December 31, 2016,is equal to the estimated useful life of the copier.First Lease routinely acquires electronic equipment for lease to other firms. The interest r
14、ate In these financing arrangements is10%.Since the lease term is equal to the expected useful life of the copier (75%), the transaction must be recorded by the lessee as a . We believe the collectibility of the lease payments is reasonably certain and any costs to the lessor that are yet incurred a
15、re reasonably predictable, this qualifies also as a to First Lease. To achieve its objectives, First Lease must (a) recover its $479,079 investment as well as (b) earn interest revenue at a rate of 10%. So, the lessor determined that annual rental payments would be $100,000.$479,079 4.79079* = $100,
16、000 rental payments.*PV of an annuity due of $1: n = 6, I = 10%$100,000 4,79079* = $479,079 lessees cost15 - 15Capital Leases Lessee and LessorDirect Financing Lease (January 1, 2011)San Serif Publishers, Inc. (Lessee)Leased equipment (PV of payments)479,079Lease payable (PV of payments) 479,079First Lease Corp. (Lessor)Lease receivable (PV of payments)479,079Inventory of equipment (Lessors cost) 479,079First Lease Payment (January 1, 2011)San Serif Publishers, Inc. (Lessee)Lease payable100,000C
