ACC 302 PPt 15

ACC 302 PPt 15 - 1 Leases Learning Objectives Describe the...

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1 Leases Leases
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2 Describe the circumstances in which leasing makes more business sense than does an outright sale and purchase. Understand the accounting issues faced by the asset owner (lessor) and the asset user (lessee) in recording a lease transaction. Outline the types of contractual provisions typically included in lease agreements. Learning Objectives
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3 Apply the lease classification criteria in order to distinguish between capital and operating leases. Properly account for both capital and operating leases from the standpoint of the lessee (asset user). Properly account for both capital and operating leases from the standpoint of the lessor (asset owner). Learning Objectives
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4 Learning Objectives Prepare and interpret the lease disclosures required of both lessors and lessees. Compare the treatment of accounting for leases in the United States with the requirements of international accounting standards.
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5 Learning Objectives Record a sale-leaseback transaction for both a seller-lessee and a purchaser- lessor. Recognize the special characteristics of real estate leases. EXPANDED MATERIAL
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6 Lease A contract specifying the terms under which the owner of an asset agrees to transfer the right to use the asset to another party.
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7 Assets Acquired by Leasing Lessee: The party granted the right to use the property under the terms of a lease. Lessor: The owner of the property that is rented (leased) to another party. Operating Lease: A simple rental agreement. Capital Lease: A leasing transaction that is recorded as a purchase by the lessee.
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8 Economic Advantages of Leasing No down payment. Avoid risks of ownership. Flexibility.
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9 Advantages to Lessor Increased sales. Ongoing business relationship with lessee. Residual valued retained.
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10 Lease Provisions Cancellation Cancellation Provision Provision Specifies under what circumstances the lease may be canceled. Lease Term Lease Term Delineates the time period the lease is to be in force. Bargain Purchase Bargain Purchase Option Option Grants lessee the right to purchase the asset at the end of the lease term for less than the residual value.
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11 Lease Provisions Residual Value Residual Value Market value of leased asset at end of lease term. Rental payment required over lease term plus any payment for residual value. Minimum Lease Minimum Lease Payment Payment
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12 Lease Classification Criteria A lease is classified as a capital lease by the lessee if it is noncancelable and meets any one of the following criteria:
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13 The lease transfers ownership of the leased asset to the lessee by the end of the lease term. The lease contains an option allowing the
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This document was uploaded on 06/11/2009.

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ACC 302 PPt 15 - 1 Leases Learning Objectives Describe the...

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