2 igaap for leases is more rules based than us gaap

This preview shows 42 out of 43 pages.

2. iGAAP for leases is more “rules-based” than U.S. GAAP and includes many bright-line criteria to determine ownership. 3. The iGAAP leasing standard is the subject of over 30 interpretations since its issuance in 1982. 4. iGAAP does not provide detailed guidance for leases of natural resources, sale-leasebacks, and leveraged leases. 5. Because iGAAP is very general in its provisions for lease accounting, the required disclosures for leases under iGAAP are more detailed and extensive than those required under U.S. GAAP. Answers to True/False: 1. False 2. False 3. False 4. True 5. False Multiple Choice 1. Which of the following statements is true when comparing the accounting for leasing transactions under U.S. GAAP with iGAAP? 1982. Answer to Multiple Choice: 1. d Short Answer 1. Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP with respect to the accounting for leases. 1. 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 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 21 - 42
Image of page 42

Subscribe to view the full document.

Accounting for Leases 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. 2. Briefly discuss the IASB and FASB efforts to converge their accounting guidelines for leases. 2. Lease accounting is one of the areas identified in the IASB/FASB Memorandum of Understanding and also a topic recommended by the SEC in its off-balance-sheet study for standard-setting attention. The joint project will initially primarily focus on lessee accounting. One of the first areas to be studied is, “What are the assets and liabilities to be recognized related to a lease contract?” Should the focus remain on the leased item or the right to use the leased item? This question is tied to the Boards’ joint project on the conceptual framework – defining an “asset” and a “liability”.
Image of page 43
You've reached the end of this preview.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern