Intermediate-Accounting-课件(PPT 70页)

1、Intermediate Accounting,17EStice | Stice | Skousen 2010 Cengage LearningPowerPoint presented by: Douglas Cloud Professor Emeritus of Accounting, Pepperdine UniversityLeases第1页，共70页。Economic Advantages to Leasing Over PurchasingNo down paymentAvoid risks of ownershipFlexibilityFor the LesseeIncreased

2、 salesOngoing business relationship with lesseeResidual value retainedFor the Lessor第2页，共70页。Simple ExampleOwner Company owns a piece of equipment with a market value of $10,000.User Company wishes to acquire the equipment.User Company can borrow $10,000 from the bank at 10% interest. Payments would

3、 be $2,638 each year for five years.(continues)第3页，共70页。Simple ExampleUser Company can lease the equipment from Owner Company for five years and make five annual “rental” payments of $2,638. Owner maintains title throughout. At the end of the lease, the equipment is no longer useful.Should Owner Com

4、pany recognize an equipment sale when the lease is signed?(continues)第4页，共70页。Simple ExampleHas effective ownership of the equipment been passed from Owner to User?Is the transaction complete?Is Owner Company reasonably certain the five annual payments can be collected from User Company?(continues)K

5、ey accounting issues for Owner Company第5页，共70页。Simple ExampleOn the date the lease is signed, should User recognize the lease equipment as an asset and the obligation to make the lease payment as a liability?The answer hinges on whether effective ownership, as opposed to legal ownership, of the equi

6、pment changes hands when Owner and User sign the lease agreement.(continues)Key accounting issues for User Company.第6页，共70页。The economic substance of this lease is that the lease signing is equivalent to the transfer of effective ownership, and the fact that Owner retains legal title of the equipmen

7、t during the lease period is a mere technicality.Simple ExampleThe arrangement should be treated as a sale by Owner and a purchase by User.第7页，共70页。Scenario OneThe lease agreement stipulates that Owner Company is to maintain legal title to the equipment for the 5-year lease period, but title is to p

8、ass to User at the end of the lease.Even though this is a leasing arrangement, the transfer of title at the end indicates that this is in substance a purchase.Simple Example第8页，共70页。Scenario TwoThe lease agreement stipulates that Owner Company is to maintain legal title to the equipment for the 5-ye

9、ar lease period, but at the end of the lease period User has the option to buy the equipment for $1.Offering the equipment to User Company for a bargain price at the end of the lease indicates that this is in substance a purchase.Simple Example第9页，共70页。Scenario ThreeThe useful life of the equipment

10、is just five years. Accordingly, when the lease term is over, the equipment can no longer be used by anyone else.Because the life of this asset and the lease term are the same, this arrangement is in substance a purchase.Simple Example第10页，共70页。Scenario FourThe present value of the lease payments eq

11、uals the $10,000 market value of the equipment on the lease signing date.When the present value of the lease payments equals the lease items market value, it is in substance a purchase.Simple Example第11页，共70页。Capital vs. Operating LeaseCapital leases are accounted for as if the lease agreement trans

12、fers ownership of the asset from the lessor to lessee.Operating leases are accounted for as rental agreements.第12页，共70页。Cancellation ProvisionsSome leases are noncancelable, meaning that these lease contracts are cancelable only on the outcome of some remote contingency or that the cancellation prov

13、isions and penalties of these leases are so costly to the lessee that cancellation will not occur.第13页，共70页。Bargain Purchase OptionIf a lease includes a provision giving the lessee the right to purchase the leased property at a price that is expected to be considerably less than the fair value, the

14、option is called a bargain purchase option.第14页，共70页。Lease TermThe lease term is the time period from the beginning to the end of the lease. The beginning of the lease term occurs when the leased property is transferred to the lessee.The end of the lease term is at the end of the fixed noncancelable

15、 lease period plus all renewal option periods that are likely to be exercised.第15页，共70页。Residual ValueThe market value of the leased property at the end of the lease term is referred to as its residual value.Some lease contracts require the lessee to guarantee a minimum residual value. If the market

16、 value falls below the guaranteed residual value, the lessee must pay the difference.第16页，共70页。Minimum Lease PaymentsThe rental payments required over the lease term plus any amount to be paid for the residual value are referred to as the minimum lease payments.Lease payments sometimes include charg

17、es for insurance, maintenance, and taxes on the leased property. These are referred to as executory costs.第17页，共70页。Lease 1The implicit interest rate is used to discount the minimum lease payments to the fair market value of the leased asset at the inception of the lease. The lessor always uses the

18、implicit rate to discount rental payments.The interest rate that the lessee could use to borrow the amount of money necessary to purchase the leased asset is the incremental borrowing rate.(continues)第18页，共70页。Lease 1The lessee uses the lower of the implicit interest rate or the incremental borrowin

19、g rate to compute present value of minimum lease payments.第19页，共70页。Lease Classification CriteriaThe lease transfers ownership of the leased asset to the lessee by the end of the lease term.The lease contains an option allowing the lessee to purchase the asset at the end of the lease term at a barga

20、in price.The lease term is equal to 75% or more of the estimated economic life of the asset. The present value of the lease payments at the beginning of the lease is 90% or more of the fair market value of the leased asset.A lease is classified as a capital lease by the lessee if it is noncancelable

21、 and meets any one of the following criteria:第20页，共70页。IASB ApproachIAS 17, “Accounting for Leases,” states simply: “A lease is classified as a finance (i.e., capital) lease if it transfers substantially all the risks and rewards incident to ownership.”This places the responsibility of distinguishin

22、g the type of lease on the accountant.第21页，共70页。General Classification CriteriaLessee and LessorThe four general criteria that apply to all leases for both the lessee and lessor relate totransfer of ownershipbargain purchase optioneconomic lifefair value of the leased asset第22页，共70页。Lease Classifica

23、tionLessorAdditional revenue recognition criteria applicable to lessors:Collectibility of the minimum lease payments must be reasonably predictable.Any unreimbursable costs yet to be incurred by the lessor can be reasonably estimated at the lease inception date.第23页，共70页。Accounting for Operating Lea

24、seLesseeThe lease terms for manufacturing equipment are $40,000 a year on a year-to-year basis. The entry to record the lease payment for the year would be:Rent Expense40,000Cash40,000第24页，共70页。The terms of the lease for an aircraft by International Airlines provide for payments of $150,000 a year f

25、or the first two years of the lease and $250,000 for each of the next three years. The total lease payments would be $1,050,000, or $210,000 a year on a straight-line basis. (continues)Operating Leases with Varying Lease Payments第25页，共70页。Operating Leases with Varying Lease PaymentsThe required entr

26、ies in the first two years would be as follows:Rent Expense210,000Cash150,000Rent Payable60,000current liabilityThe entries for each of the last three years are as follows:Rent Expense210,000Rent Payable40,000Cash250,000第26页，共70页。Lease period: 5 years, beginning January 1, 2011, noncancelableRent am

27、ount: $65,000 per year payable annually in advance; includes $5,000 to cover executory costsEstimated economic life of equipment: 5 yearsExpected residual value of equipment at end of lease period: NoneMarshall CorporationLessee(continues)Accounting for Capital LeasesLessee第27页，共70页。Leased Equipment

28、250,192 Obligations under Capital Leases250,192Marshall Corp. Entries on January 1, 2011Lease Expense 5,000Obligations under Capital Leases60,000 Cash65,000 (PMT = $60,000; N = 5; I = 10%)Accounting for Capital LeasesLessee(continues)第28页，共70页。(continues)第29页，共70页。Marshall Corp. Entries on December

29、31, 2011Accounting for Capital LeasesLesseeAmortization Expense on Leased Equipment 50,038Accumulated Amortization on Leased Equipment50,038 $250,192 5If normal company depreciation policy for this type of equipment is used, the amortization entry for 2011 is shown below:(continues)第30页，共70页。Prepaid

30、 Executory Costs 5,000Obligations under Capital Leases40,981Interest Expense19,019 Cash65,000 Accounting for Capital LeasesLesseeEntries on December 31, 2011($250,192 $60,000) 0.10第31页，共70页。Accounting for Leases with a Bargain Purchase OptionFrequently, the lessee is given the option of purchasing t

31、he property in the future at what appears to be a bargain price.The present value of the bargain purchase option would be added to the present value of the minimum lease payments to establish the initial asset and liability.第32页，共70页。 There is a bargain purchase option of $75,000 exercisable after f

32、ive yearsLesseeAccounting for Leases with a Bargain Purchase OptionLease period: 5 years, beginning January 1, 2011, noncancelableRent amount: $65,000 per year payable annually in advance; includes $5,000 to cover executory costsEstimated economic life of equipment: 5 yearsExpected residual value of

33、 equipment at end of lease period: NoneThese are the same facts as before, but with one new item.第33页，共70页。Minimum Lease PaymentPresent value of five payments at the beginning of each year for five years:PMT = $60,000, N = 5, I = 10% $250,192Present value of the bargain purchaseoption of $75,000 at

34、the end of 5 years:FV = $75,000, N = 5, I = 10% 46,569 Present value of minimum lease payment$296,761Accounting for Leases with a Bargain Purchase Option第34页，共70页。第35页，共70页。Entries on December 31, 2015Obligations under Capital Leases68,182Interest Expense6,818Cash75,000To record exercise of bargain

35、purchase option.Equipment148,381Accumulated Amortization onLeased Equipment148,380Leased Equipment296,761To transfer remaining balance inleased asset account to Equipment.$68,182 10%($296,761 10) 5 yearsAccounting for Leases with a Bargain Purchase Option第36页，共70页。Accounting for Leases with a Bargai

36、n Purchase OptionIf the equipment is not purchased and the lease is permitted to lapse, the following entry is required on December 31, 2015:Loss from Failure to Exercise Bargain Purchase Option73,381Obligation under Capital Leases68,182Interest Expense6,818Accumulated Amortization onLeased Equipmen

37、t148,380Leased Equipment296,761.第37页，共70页。Accounting for Purchase of Asset During Lease TermOn December 31, 2013, the lessee purchased the leased property in the Marshall Corporation example for $120,000. At that date, the remaining liability recorded on the lessees books is $114,545 and the net boo

38、k value of the recorded leased asset is $100,078 capitalized value of $250,192 less $150,114 amortization ($50,038 3).(continues)第38页，共70页。Given the facts in Slide 15-38, the entry to record the purchase on the lessees books would be as follows:Interest Expense10,413Obligation under Capital Leases10

39、4,132Equipment105,533Accumulated Amortization onLeased Equipment150,114Leased Equipment250,192Cash120,000$100,078 + ($120,000 $114,545)Accounting for Purchase of Asset During Lease Term第39页，共70页。In 2011, Marshall Corporations income before any lease-related expenses is $200,000. Net income for the y

40、ear is computed as follows:Income before lease-related expenses$200,000Lease-related interest expense(19,019)Lease-related amortization expense (50,038) Net income$130,943Treatment of Leases on Lessees Statement of Cash Flows第40页，共70页。Accounting for LeasesLessorDirect financing leases involve a less

41、or who is primarily engaged in financing activities, such as a bank or finance company.Sales-type leases involve manufacturers or dealers who use leases as a means of facilitating the marketing of their products.第41页，共70页。Revenue Generated by a Sales-Type LeaseA sales-type lease generates two differ

42、ent types of revenue:An immediate profit or loss, which is the difference between the cost of the property being leased and its sales price, or fair value, at the inception of the leaseInterest revenue earned over time as the lessee makes the lease payments第42页，共70页。Accounting for Operating LeasesLe

43、ssorMinimum payment (in advance) including $5,000 executory cost $65,000/yearLease period (beginning Jan. 1, 2011) 5 yearsEconomic life of asset 10 yearsEstimated residual value at end of lease$0Implicit rate10%Incremental borrowing rate10%Cost to lessor$400,000Direct costs incurred $15,000Universal

44、 Leasing Co. (Lessor)(continues)第43页，共70页。Accounting for Operating LeasesLessorUniversal Leasing Co. (Lessor)To record the payment of the initial direct costs and the receipt of the lease payment on January 1, 2011:Deferred Initial Direct Costs15,000Cash15,000Cash65,000Rent Revenue60,000Executory Co

45、sts5,000(continues)第44页，共70页。Accounting for Operating LeasesLessorUniversal Leasing Co. (Lessor)To record the amortization of direct costs over five years and the depreciation of equipment over ten years using the straight-line basis:Amortization of Initial Direct Costs3,000Deferred Initial Direct C

46、osts3,000Depreciation Expense on Leased Equipment40,000Accumulated Depreciation on Leased Equipment40,000第45页，共70页。Accounting for Direct Financing LeasesRefer to Slides 15-27 and 15-28 for details concerning Marshall Corporations leasing arrangement with Universal Leasing Company. The cost of the eq

47、uipment to Universal was the same as the fair value, $250,192 and Equipment Purchased for Lease was charged when the equipment was acquired. Left click on the button to go to Slide 15-27, then type “46” and press the “Enter” key to return to this slide.(continues)第46页，共70页。To record initial lease on

48、 January 1, 2011:Lease Payments Receivable300,000Equipment Purchased for Lease250,192Unearned Interest Revenue49,808Accounting for Direct Financing Leases(continues)Receivable Recorded at Gross AmountTo record first payment on January 1, 2011:Cash65,000Lease Payment Receivable60,000Executory Costs5,

49、000第47页，共70页。Accounting for Direct Financing LeasesTo record receipt of payment on December 31, 2011:Cash65,000Lease Payment Receivable60,000Deferred Executory Costs (a liability)5,000Unearned Interest Revenue19,019Interest Revenue19,019(continues)第48页，共70页。Lessor Accounting for Direct Financing Lea

50、ses with Residual ValueAssuming the same facts as the last illustration, except that the asset has a residual value at the end of the 5-year lease of $75,000. Assume the cost to Universal Leasing Company was $296,761 (which is also its fair value).第49页，共70页。Lessor Accounting for Direct Financing Lea

51、ses with Residual ValueTo record initial lease on January 1, 2011:Lease Payments Receivable296,761Equipment Purchased for Lease296,761(continues)Receivable Recorded at Net AmountTo record first payment on January 1, 2011:Cash65,000Lease Payment Receivable60,000Executory Costs5,000第50页，共70页。Lessor Ac

52、counting for Direct Financing Leases with Residual ValueTo record payment on December 31, 2011:Cash65,000Lease Payments Receivable36,324Deferred Executory Cost5,000Interest Revenue23,676To record recovery of the leased asset on December 31, 2015:Equipment75,000Lease Payment Receivable68,182Interest

53、Revenue6,818第51页，共70页。Accounting for Sales-Type LeasesLessorIf there is no difference between the sales price and the lessors cost, the lease is not a sales-type lease.The lessor will also recognize interest revenue over the lease term for the difference between the sales price and the gross amount

54、of the minimum lease payments.第52页，共70页。Accounting for Sales-Type LeasesLessor(3) Cost or carrying value of leased asset to lessorManufacturers or DealersProfit (Loss)(1) Minimum lease payments(2) Fair value of leased assetFinancial Revenue (Interest)第53页，共70页。Accounting for Sales-Type LeasesLessorF

55、air value of equipment$250,192Lease period (beginning Jan. 1, 2011) 5 yearsEconomic life of asset 10 yearsEstimated residual value at end of lease$0Implicit rate10%PV of future lease payments$250,192Cost to lessor$160,000Direct costs incurred $15,000American Manufacturing Co. (Lessor)(continues)第54页

56、，共70页。Accounting for Sales-Type LeasesLessor Minimum lease payments: ($65,000 $5,000) 5$300,000 Fair value of equipment$250,192$49,808 (Interest Revenue)Cost of leased equipmentto lessor, plus initial directcosts$175,000$75,192 (Mfr.s Profit)(continues)第55页，共70页。Accounting for Sales-Type LeasesLesso

57、rAmerican Manufacturing Co. (Lessor)Lease Payments Receivable250,192Sales250,192Cost of Goods Sold175,000Finished Goods Inventory160,000Deferred Initial Direct Costs15,000Cash65,000Lease Payments Receivable60,000Executory Costs5,000To record entries on January 1, 2011:第56页，共70页。The minimum lease pay

58、ments will include the following if they are part of the agreement:A lump sum (from a bargain purchase option) at the end of the lease term ORA guaranteed residual value The receivable is increased by the gross amount of the bargain purchase option or the guaranteed residual value.Accounting for Sal

59、es-Type LeasesBPO or Guaranteed R/V第57页，共70页。Accounting for Sales-Type LeasesBPO or Guaranteed R/VUsing the data from Exhibit 15-5, American Manufacturing offers a bargain purchase option of $75,000 at the end of five years.(continues)第58页，共70页。Accounting for Sales-Type LeasesBPO or Guaranteed R/VLe

60、ase Payments Receivable296,761Sales296,761Cost of Goods Sold175,000Finished Goods Inventory160,000Deferred Initial Direct Costs15,000Cash65,000Lease Payments Receivable60,000Executory Costs5,000To record entries on January 1, 2011:American Manufacturing Co. (Lessor)第59页，共70页。Accounting for Sales-Typ