T13

Ch21: Accounting for Leases

A lease is a contractual agreement between a lessor and a lessee that conveys to the lessee the right to use specific property (real or personal), owned by the lessor, for a specified period of time. In return, the lessee periodically pays cash (rent) to the lessor

Lease transactions

Advantages

Leases by lessees

Criteria

1) 100 percent financing

2) protection against obsolescence

3) flexibility

4) less costly financing

5) possible tax advantages

6) off-balance-sheet financing

1) Transfers ownership of the property to the lessee.

2) Contains a bargain-purchase option.

3) The lease term is = or > 75 % of the estimated economic life of the leased property.

4) The present value of the minimum lease payments (excluding executory costs) = or > 90 % of the fair value of the leased property.

Leases by lessors

Benefits

1) interest revenue

2) tax incentives

3) residual value profits

Classifications

1) accounting purposes

2) arrangement as a direct-financing lease or a sales-type lease

Lease arrangements

Special features

1) residual values,

2) sales-type leases (lessor),

3) bargain-purchase options

4) initial direct costs

5) current versus noncurrent

6) disclosures.

Mariel Amaro Fresán

A01337608

Conta. inter. 2/ 10:00 am

Tarea # 13

Fecha de entrega: 04/03/2019