lessee ltd - lease even if there is no transferred of...

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1) Junior accountant (incorrect) a. The analysis done by the junior accountant is incorrect it is a Finance lease not an operating lease. According to IFRS a lease is consider a finance lease if the lease term is for the majority of the property’s useful life, even if the title does not change. b. It uses the incremental borrowing rate when implicit rate is know is also according GAAP, since they file with IFRS, it is wrong. 2) Senior accountant (correct) a. It is a fiancé lease because under IFRS as long as majority of the property’s useful life is with in the lease, it is considered a finance
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Unformatted text preview: lease even if there is no transferred of title. b. Under IAS 17, they are to use the implicit rate when available. Incremental rate is only used if implicite is unknown 3) If the company used GAAP for their accounting that they would consider this Lease as an operating lease instead due the clause that at the end of the lease the property will go back to the lessor with a guaranteed residual value of 20,000. When calculating the MLP the 20,0000 will be taken out of the the leasee’s calculations....
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This note was uploaded on 03/09/2012 for the course ACCT 475 taught by Professor Hussine during the Spring '12 term at California State University Los Angeles .

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