IFRS CH 21 - IFRS Leases (cont) Recognizing a Gain on a...

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IFRS - Leases Lease Classification: Under IFRS, a lease is a capital lease (known as a finance lease under IFRS) if substantially all risks and rewards of ownership are transferred This is judged by looking for “indicators”; some of these are similar to US GAAP, but less specific in nature
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IFRS – Leases (cont) IAS No. 17 considers land and buildings separate elements unless the land elements is immaterial Under US GAAP land and buildings are normally accounted for as a single unit, unless the land accounts for more than 25% of the total value of the leased property
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IFRS – Leases (cont) Present Value of Minimum Lease Payments: Generally both parties under IAS No. 17 use the rate implicit in the lease to discount minimum lease payments Under US GAAP, lessors use the implicit rate, and lessees use the incremental borrowing rate – the exception is if the implicit rate is known and is a lower rate
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Unformatted text preview: IFRS Leases (cont) Recognizing a Gain on a Sale and Leaseback Transaction: When the leaseback is an operating lease The gain is recognized immediately under IAS No. 17 The gain is amortized over the lease term under US GAAP When the leaseback is a finance (capital) lease The gain is recognized over the lease term under IAS No. 17 The gain is recognized over the useful life of the asset under US GAAP IFRS Leases (cont) IASB & FASB Collaboration: Working on a joint project for the revision of leasing standards Agree that a right of use model is the only approach that recognizes assets and liabilities that correspond to the framework definitions The expectation is that the new standard will result in most, if not all, leases being recorded as an intangible asset for the right of use, and as a liability for the present value of the lease payments...
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IFRS CH 21 - IFRS Leases (cont) Recognizing a Gain on a...

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