2-3-11 Solutions - Q21-21. Both U.S. GAAP and iGAAP share...

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Q21-21. Both U.S. GAAP and iGAAP share the same objective of recording leases by lessees and lessors according to their economic substance—that is, according to the definitions of assets and liabilities. Leasing was on the FASB’s initial agenda in 1973 and GAAP rules were was issued in 1976 (before the conceptual framework was developed). U.S. GAAP for leases has been the subject of more than 30 interpretations since its issuance. The iGAAP standard is subject to just three interpretations. One reason for this small number of interpretations is that iGAAP does not specifically address a number of leasing transactions that are covered by U.S. GAAP. Examples include lease agreements for natural resources, sale- leasebacks, real estate leases, and leveraged leases. U.S. GAAP for leases is much more “rule-based” with specific bright- line criteria to determine if a lease arrangement transfers the risks and rewards of ownership; iGAAP is more general in its provisions. Q21-22. One example of the less detailed guidance in lease accounting under iGAAP involves disclosure policy. Under U.S. GAAP, extensive disclosure of future noncancelable lease payments is required for the next five years and the years thereafter. Under iGAAP, not as much detail is required, as shown in the sample disclosure below. iGAAP Sample Lease Note Disclosure The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets. Finance lease liabilities (euros, 000,000) Minimum lease payments, 31/12/08 No later than 1 year. ......................................................................... 58 Later than 1 year and not later than 5 years. ................................... 44
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This note was uploaded on 01/31/2011 for the course MGMT 351 taught by Professor Staff during the Spring '08 term at Purdue University-West Lafayette.

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2-3-11 Solutions - Q21-21. Both U.S. GAAP and iGAAP share...

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