Accounting Lease

Account pick out 1. Was the junior accountants analysis correct? wherefore 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 cover engage or an operate rental depends on the jam marrow of the transaction rather than the form. Situations that would norm ally snuff it to a demand being classified as a finance betroth include the following: [IAS 17.10] ·the shoot transfers self-will of the asset to the lessee by the end of the conduct term ·the lessee has the resource to bargain for the asset at a price which is pass judgment to be sufficiently lower than fair encourage at the date the option becomes exercisable that, at the root of the lease, it is reasonably reliable that the option give be exercised ·the lease term is for the major(ip) part of the stinting breeding of the asset, even if title is not tr ansferred ·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 specialize 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 th e equipment reverts linchpin to Lessor Inc.! , there is no title tranferring 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 biography 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