西方财务会计-原版课件21

西方财务会计-原版课件21CHAPTER21ACCOUNTINGFORLEASESIntermediateAccounting13thEditionKieso,Weygandt,andWarfield

CHAPTER21ACCOUNTINGFExplainthenature,economicsubstance,andadvantagesofleasetransactions.Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.Contrasttheoperatingandcapitalizationmethodsofrecordingleases.Identifytheclassificationsofleasesforthelessor.Describethelessor’saccountingfordirect-financingleases.Identifyspecialfeaturesofleasearrangementsthatcauseuniqueaccountingproblems.Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.Describethelessor’saccountingforsales-typeleases.Listthedisclosurerequirementsforleases.LearningObjectivesExplainthenature,economicsLeasingEnvironmentWhoareplayers?AdvantagesofleasingConceptualnatureofaleaseAccountingbyLesseeAccountingbyLessorSpecialAccountingProblemsCapitalizationcriteriaAccountingdifferencesCapitalleasemethodOperatingmethodComparisonResidualvaluesSales-typeleasesBargain-purchaseoptionInitialdirectcostsCurrentversusnoncurrentDisclosureUnresolvedproblemsEconomicsofleasingClassificationDirect-financingmethodOperatingmethodAccountingforLeasesLeasingEnvironmentWhoareplaLargestgroupofleasedequipmentinvolves:

InformationtechnologyTransportation(trucks,aircraft,rail)ConstructionAgricultureLO1Explainthenature,economicsubstance,andadvantagesofleasetransactions.Alease

isacontractualagreementbetweenalessorandalessee,thatgivesthelessee

therighttousespecificproperty,ownedbythelessor,foraspecifiedperiodoftime.TheLeasingEnvironmentLargestgroupofleasedequipmThreegeneralcategories:Banks.Captiveleasingcompanies.Independents.LO1Explainthenature,economicsubstance,andadvantagesofleasetransactions.WhoArethePlayers?TheLeasingEnvironmentThreegeneralcategories:LO100%FinancingatFixedRates.ProtectionAgainstObsolescence.Flexibility.LessCostlyFinancing.TaxAdvantages.Off-Balance-SheetFinancing.TheLeasingEnvironmentLO1Explainthenature,economicsubstance,andadvantagesofleasetransactions.AdvantagesofLeasing100%FinancingatFixedRates.Capitalizealeasethattransferssubstantiallyallofthebenefitsandrisksofpropertyownership,providedtheleaseisnoncancelable.Leasesthatdonottransfersubstantiallyallthebenefitsandrisksofownershipareoperatingleases.TheLeasingEnvironmentLO1Explainthenature,economicsubstance,andadvantagesofleasetransactions.ConceptualNatureofaLeaseCapitalizealeasethattransfOperatingLeaseCapitalLeaseJournalEntry:

Rentexpense xxxCash xxxJournalEntry:

LeasedequipmentxxxLeaseliabilityxxxTheissueofhowtoreportleasesisthecaseofsubstanceversusform.Althoughtechnicallylegaltitlemaynotpass,thebenefitsfromtheuseofthepropertydo.Aleasethattransferssubstantiallyallofthebenefitsandrisksofpropertyownershipshouldbecapitalized(onlynoncancellableleasesmaybecapitalized).TheLeasingEnvironmentLO1Explainthenature,economicsubstance,andadvantagesofleasetransactions.OperatingLeaseCapitalLeaseJoIfthelesseecapitalizes

alease,thelesseerecordsanassetandaliabilitygenerallyequaltothepresentvalueoftherentalpayments.Recordsdepreciationontheleasedasset.Treatstheleasepaymentsasconsistingofinterestandprincipal.AccountingbytheLesseeLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.TypicalJournalEntriesforCapitalizedLeaseIllustration21-2IfthelesseecapitalizesaleTorecordaleaseasacapitallease,theleasemustbenoncancelable.Oneormoreoffourcriteriamustbemet:Transfersownershiptothelessee.Containsabargain-purchaseoption.Leasetermisequaltoorgreaterthan75percentoftheestimatedeconomiclifeoftheleasedproperty.Thepresentvalueoftheminimumleasepayments(excludingexecutorycosts)equalsorexceeds90percentofthefairvalueoftheleasedproperty.AccountingbytheLesseeLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.TorecordaleaseasacapitalLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.LeaseAgreementLeasesthatDONOTmeetanyofthefourcriteriaareaccountedforasOperatingLeases.AccountingbytheLesseeIllustration21-4LO2DescribetheaccountingcCapitalizationCriteriaLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeTransferofOwnershipTestNotcontroversialandeasilyimplemented.Bargain-PurchaseOptionTestAttheinceptionofthelease,thedifferencebetweentheoptionpriceandtheexpectedfairmarketvaluemustbelargeenoughtomakeexerciseoftheoptionreasonablyassured.CapitalizationCriteriaLO2DeCapitalizationCriteriaLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeEconomicLifeTest(75%Test)Leasetermisgenerallyconsideredtobethefixed,noncancelabletermofthelease.Bargain-renewaloptioncanextendthisperiod.Attheinceptionofthelease,thedifferencebetweentherenewalrentalandtheexpectedfairrentalmustbegreatenoughtomakeexerciseoftheoptiontorenewreasonablyassured.CapitalizationCriteriaLO2DeRecoveryofInvestmentTest(90%Test)LO2AccountingbytheLesseeMinimumLeasePayments:MinimumrentalpaymentGuaranteedresidualvaluePenaltyforfailuretorenewBargain-purchaseoptionExecutoryCosts:InsuranceMaintenanceTaxesExcludefromPVofMinimumLeasePaymentCalculationCapitalizationCriteriaRecoveryofInvestmentTest(9AccountingbytheLesseeDiscountRateLesseecomputesthepresentvalueoftheminimumleasepaymentsusingitsincrementalborrowingrate,withoneexception.Ifthelesseeknowstheimplicitinterestrate

computedbythelessor

anditislessthanthelessee’sincrementalborrowingrate,thenlesseemustusethelessor’srate.RecoveryofInvestmentTest(90%Test)CapitalizationCriteriaLO2AccountingbytheLesseeDiscouAssetandLiabilityRecordedatthelowerof:presentvalueoftheminimumleasepayments(excludingexecutorycosts)orfair-marketvalueoftheleasedasset.AssetandLiabilityAccountedforDifferentlyLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeAssetandLiabilityRecordedaLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeDepreciationPeriodIfleasetransfersownership,depreciateassetovertheeconomiclifeoftheasset.Ifleasedoesnottransferownership,depreciateoverthetermofthelease.AssetandLiabilityAccountedforDifferentlyLO2DescribetheaccountingcLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeEffective-InterestMethodTheeffective-interestmethodisusedtoallocateeachleasepaymentbetweenprincipalandinterest.AssetandLiabilityAccountedforDifferentlyDepreciationConceptDepreciationandthedischargeoftheobligationareindependentaccountingprocesses.LO2DescribetheaccountingcE21-1(CapitalLeasewithUnguaranteedResidualValue):

OnJanuary1,2011,AdamsCorporationsigneda5-yearnoncancelableleaseforamachine.ThetermsoftheleasecalledforAdamstomakeannualpaymentsof$9,968atthebeginningofeachyear,startingJanuary1,2011.Themachinehasanestimatedusefullifeof6yearsanda$5,000unguaranteedresidualvalue.Adamsusesthestraight-linemethodofdepreciationforallofitsplantassets.Adams’sincrementalborrowingrateis10%,andtheLessor’simplicitrateisunknown.LO2AccountingbytheLesseeInstructionsWhattypeofleaseisthis?Explain.Computethepresentvalueoftheminimumleasepayments.PrepareallnecessaryjournalentriesforAdamsforthisleasethroughJanuary1,2012.E21-1(CapitalLeasewithUnguE21-1:Whattypeofleaseisthis?Explain.LO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeCapitalizationCriteria:TransferofownershipBargainpurchaseoptionLeaseterm=>75%ofeconomiclifeofleasedpropertyPresentvalueofminimumleasepayments=>90%ofFMVofpropertyNONOLeaseterm 5yrs.Economiclife 6yrs.

YES 83.3%FMVofleasedpropertyisunknown.CapitalLease,#3E21-1:WhattypeofleaseisE21-1:Computepresentvalueoftheminimumleasepayments.LO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseePayment $9,968Presentvaluefactor(i=10%,n=5) 4.16986PVofminimumleasepayments

$41,565

LeasedMachineUnderCapitalLeases 41,565 LeaseLiability 41,565LeaseLiability 9,968 Cash 9,9681/1/11JournalEntries:E21-1:ComputepresentvalueE21-1:LeaseAmortizationScheduleLO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeE21-1:LeaseAmortizationScheE21-1:JournalentriesforAdamsthroughJan.1,2012.LO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeDepreciationExpense 8,313 AccumulatedDepreciation—CapitalLeases 8,313 ($41,565÷5=$8,313)InterestExpense 3,160 InterestPayable 3,160

($41,565–$9,968)X.10]12/31/11E21-1:JournalentriesforAdaE21-1:JournalentriesforAdamsthroughJan.1,2012.LO2Describetheaccountingcriteriaandproceduresforcapitalizingleasesbythelessee.AccountingbytheLesseeLeaseLiability 6,808InterestPayable 3,160 Cash 9,9681/1/12E21-1:JournalentriesforAdaLO3Contrasttheoperatingandcapitalizationmethodsofrecordingleases.AccountingbytheLesseeOperatingMethodThelesseeassignsrenttotheperiodsbenefitingfromtheuseoftheassetandignores,intheaccounting,anycommitmentstomakefuturepayments.Illustration:AssumeAdamsaccountsforitasanoperatinglease.AdamsrecordsthispaymentonJanuary1,2011,asfollows. RentExpense 9,968 Cash 9,968LO3ContrasttheoperatinganE21-1:ComparisonofCapitalLeasewithOperatingLeaseLO3Contrasttheoperatingandcapitalizationmethodsofrecordingleases.AccountingbytheLesseeE21-1:ComparisonofCapitalLInterestRevenue.TaxIncentives.HighResidualValue.AccountingbytheLessorBenefitstotheLessorLO4Identifytheclassificationsofleasesforthelessor.InterestRevenue.AccountingbyAlessordeterminestheamountoftherental,basedontherateofreturnneededtojustifyleasingtheasset.Ifaresidualvalueisinvolved(whetherguaranteedornot),thecompanywouldnothavetorecoverasmuchfromtheleasepaymentsEconomicsofLeasingAccountingbytheLessorLO4Identifytheclassificationsofleasesforthelessor.AlessordeterminestheamountE21-10(ComputationofRental):

FievalLeasingCompanysignsanagreementonJanuary1,2010,toleaseequipmenttoReidCompany.Thefollowinginformationrelatestothisagreement.Thetermofthenoncancelableleaseis6yearswithnorenewaloption.Theequipmenthasanestimatedeconomiclifeof6years.Thecostoftheassettothelessoris$343,000.ThefairvalueoftheassetatJanuary1,2010,is$343,000.Theassetwillreverttothelessorattheendoftheleasetermatwhichtimetheassetisexpectedtohavearesidualvalueof$61,071,noneofwhichisguaranteed.Theagreementrequiresannualrentalpayments,beg.Jan.1,2010.Collectibilityoftheleasepaymentsisreasonablypredictable.Therearenoimportantuncertaintiessurroundingtheamountofcostsyettobeincurredbythelessor.AccountingbytheLessorLO4Identifytheclassificationsofleasesforthelessor.E21-10(ComputationofRental)AccountingbytheLessorLO4Identifytheclassificationsofleasesforthelessor.E21-10(ComputationofRental):Assumingthelessordesiresa10%rateofreturnonitsinvestment,calculatetheamountoftheannualrentalpaymentrequired.÷x-AccountingbytheLessorLO4IOperatingleases.Direct-financingleases.Sales-typeleases.ClassificationofLeasesbytheLessorAccountingbytheLessorLO4Identifytheclassificationsofleasesforthelessor.Operatingleases.ClassificatioClassificationofLeasesbytheLessorAccountingbytheLessorLO4Identifytheclassificationsofleasesforthelessor.Asales-typeleaseinvolvesamanufacturer’sordealer’sprofit,andadirect-financingleasedoesnot.Illustration21-10ClassificationofLeasesbythClassificationofLeasesbytheLessorAccountingbytheLessorLO4Identifytheclassificationsofleasesforthelessor.Alessormayclassifyaleaseasanoperating

leasebutthelesseemayclassifythesameleaseasacapital

lease.Illustration21-11ClassificationofLeasesbythInsubstancethefinancingofanassetpurchasebythelessee.Direct-FinancingMethod(Lessor)AccountingbytheLessorLO5Describethelessor’saccountingfordirect-financingleases.InsubstancethefinancingofAccountingbytheLessorE21-10:Prepareanamortizationschedulethatwouldbesuitableforthelessor.LO5Describethelessor’saccountingfordirect-financingleases.AccountingbytheLessorE21-10AccountingbytheLessorE21-10:

Prepareallofthejournalentriesforthelessorfor2010and2011.LO5Describethelessor’saccountingfordirect-financingleases.1/1/10 LeaseReceivable 343,000 Equipment 343,0001/1/10 Cash 64,400 LeaseReceivable 64,40012/31/10 InterestReceivable 27,860 InterestRevenue 27,860AccountingbytheLessorE21-10AccountingbytheLessorE21-10:

Prepareallofthejournalentriesforthelessorfor2010and2011.LO5Describethelessor’saccountingfordirect-financingleases.1/1/11 Cash 64,400 LeaseReceivable 36,540 InterestReceivable 27,86012/31/11 InterestReceivable 24,206 InterestRevenue 24,206AccountingbytheLessorE21-10Recordseachrentalreceiptasrentalrevenue.Depreciatestheleasedassetinthenormalmanner.OperatingMethod(Lessor)AccountingbytheLessorLO5Describethelessor’saccountingfordirect-financingleases.RecordseachrentalreceiptasIllustration:AssumeFievalaccountsfortheleaseasanoperatinglease.Itrecordsthecashrentalreceiptasfollows:OperatingMethod(Lessor)AccountingbytheLessorLO5Describethelessor’saccountingfordirect-financingleases.Cash 64,400 RentalRevenue 64,400Depreciationisrecordedasfollows:DepreciationExpense 57,167 AccumulatedDepreciation 57,167$343,000/6years=57,167Illustration:AssumeFievalaResidualvalues.Sales-typeleases(lessor).Bargain-purchaseoptions.Initialdirectcosts.Currentversusnoncurrentclassification.Disclosure.SpecialAccountingProblemsLO6Identifyspecialfeaturesofleasearrangementsthatcauseuniqueaccountingproblems.Residualvalues.SpecialAccounMeaningofResidualValue-Estimatedfairvalueoftheleasedassetattheendoftheleaseterm.GuaranteedResidualValue–Lesseeagreestomakeupanydeficiencybelowastatedamountthatthelessorrealizesinresidualvalueattheendoftheleaseterm.ResidualValuesSpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.MeaningofResidualValue-EsLesseeAccountingforResidualValueTheaccountingconsequenceisthattheminimumleasepayments,includetheguaranteedresidualvaluebutexcludestheunguaranteedresidualvalue.ResidualValuesSpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.LesseeAccountingforResidualIllustration(GuaranteedResidualValue–LesseeAccounting):

CaterpillarFinancialServicesCorp.(asubsidiaryofCaterpillar)andSterlingConstructionCorp.signaleaseagreementdatedJanuary1,2011,thatcallsforCaterpillartoleaseafront-endloadertoSterlingbeginningJanuary1,2011.Thetermsandprovisionsoftheleaseagreement,andotherpertinentdata,areasfollows.Thetermoftheleaseisfiveyears.Theleaseagreementisnoncancelable,requiringequalrentalpaymentsatthebeginningofeachyear(annuityduebasis).Theloaderhasafairvalueattheinceptionoftheleaseof$100,000,anestimatedeconomiclifeoffiveyears,andnoresidualvalue.SpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.Illustration(GuaranteedResidIllustration(GuaranteedResidualValue–LesseeAccounting):Sterlingpaysalloftheexecutorycostsdirectlytothirdpartiesexceptforthepropertytaxesof$2,000peryear,whichisincludedaspartofitsannualpaymentstoCaterpillar.Theleasecontainsnorenewaloptions.TheloaderrevertstoCaterpillarattheterminationofthelease.Sterling’sincrementalborrowingrateis11percentperyear.Sterlingdepreciatesonastraight-linebasis.Caterpillarsetstheannualrentaltoearnarateofreturnonitsinvestmentof10percentperyear;Sterlingknowsthisfact.Caterpillarestimatesaresidualvalueof$5,000atheendofthelease.SpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.Illustration(GuaranteedResidIllustration(GuaranteedResidualValue–LesseeAccounting):Caterpillarwouldcomputetheamountoftheleasepaymentsasfollows:SpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.Illustration21-16NOTE:FortheLessee,theminimumleasepaymentincludestheguaranteedresidualvaluebutexcludestheunguaranteedresidualvalue.SolutiononnotespageIllustration(GuaranteedResidIllustration21-17Illustration(GuaranteedResidualValue–LesseeAccounting):ComputationofLessee’scapitalizedamountSpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.SolutiononnotespageIllustration21-17IllustrationIllustration(GuaranteedResidualValue–LesseeAccounting):ComputationofLeaseAmortizationScheduleIllustration21-18SpecialAccountingProblemsLO7Illustration(GuaranteedResidIllustration(GuaranteedResidualValue–LesseeAccounting):Attheendoftheleaseterm,beforethelesseetransferstheassettoCaterpillar,theleaseassetandliabilityaccountshavethefollowingbalances.Illustration21-19SpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.Illustration(GuaranteedResidIllustration(GuaranteedResidualValue–LesseeAccounting):AssumethatSterlingdepreciatedtheleasedassetdowntoitsresidualvalueof$5,000butthatthefairmarketvalueoftheresidualvalueatDecember31,2015,was$3,000.Sterlingwouldmakethefollowingjournalentry.SpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.LossonCapitalLease 2,000.00InterestExpense(orInterestPayable) 454.76LeaseLiability 4,545.24AccumulatedDepreciation—CapitalLeases 95,000.00 LeasedEquipmentunderCapitalLeases 100,000.00 Cash 2,000.00Illustration(GuaranteedResidIllustration(UnguaranteedResidualValue–LesseeAccounting):Assumethesamefactsasthoseaboveexceptthatthe$5,000residualvalueisunguaranteedinsteadofguaranteed.Caterpillarwouldcomputetheamountoftheleasepaymentsasfollows:SpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.Illustration21-20SolutiononnotespageIllustration(UnguaranteedResIllustration(UnguaranteedResidualValue–LesseeAccounting):ComputationofLeaseAmortizationScheduleIllustration21-21SpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.Illustration(UnguaranteedResIllustration(UnguaranteedResidualValue–LesseeAccounting):Attheendoftheleaseterm,beforeSterlingtransferstheassettoCaterpillar,theleaseassetandliabilityaccountshavethefollowingbalances.Illustration21-22SpecialAccountingProblemsLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.Illustration(UnguaranteedResSpecialAccountingProblemsIllustration21-23ComparativeEntries,LesseeCompanySpecialAccountingProblemsIllSpecialAccountingProblemsIllustration:Assumeadirect-financingleasewitharesidualvalue(eitherguaranteedorunguaranteed)of$5,000.Caterpillardeterminesthepaymentsasfollows.LO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.LessorAccountingforResidualValueThelessorworksontheassumptionthatitwillrealizetheresidualvalueattheendoftheleasetermwhetherguaranteedorunguaranteed.Illustration21-24SpecialAccountingProblemsIllSpecialAccountingProblemsLessorAccountingforResidualValueIllustration:LeaseAmortizationSchedule,forLessor—GuaranteedorUnguaranteedResidualValueIllustration21-25SpecialAccountingProblemsLesLO7Describetheeffectofresidualvalues,guaranteedandunguaranteed,onleaseaccounting.SpecialAccountingProblemsLessorAccountingforResidualValueIllustration:Caterpillarwouldmakethefollowingentriesforthisdirect-financingleaseinthefirstyear.Illustration21-26SolutiononnotespageLO7DescribetheeffectofrePrimarydifferencebetweenadirect-financingleaseandasales-typelease

isthemanufacturer’sordealer’sgrossprofit(orloss).Lessorrecordsthesalepriceoftheasset,thecostofgoodssoldandrelatedinventoryreduction,andtheleasereceivable.Differenceinaccountingforguaranteedandunguaranteedresidualvalues.Sales-TypeLeases(Lessor)SpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.PrimarydifferencebetweenadSales-TypeLeases(Lessor)SpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.Illustration:Toillustrateasales-typeleasewithaguaranteedresidualvalueandwithanunguaranteedresidualvalue,assumethesamefactsasintheprecedingdirect-financingleasesituation.Theestimatedresidualvalueis$5,000(thepresentvalueofwhichis$3,104.60),andtheleasedequipmenthasan$85,000costtothedealer,Caterpillar.Assumethatthefairmarketvalueoftheresidualvalueis$3,000attheendoftheleaseterm.Sales-TypeLeases(Lessor)SpecSales-TypeLeases(Lessor)SpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.Illustration:ComputationofLeaseAmountsbyCaterpillarFinancial—Sales-TypeLeaseIllustration21-28Sales-TypeLeases(Lessor)SpecSales-TypeLeases(Lessor)SpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.Illustration:CaterpillarmakesthefollowingentriestorecordthistransactiononJanuary1,2011,andthereceiptoftheresidualvalueattheendoftheleaseterm.Illustration21-29Sales-TypeLeases(Lessor)SpecSales-TypeLeases(Lessor)SpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.Illustration:CaterpillarmakesthefollowingentriestorecordthistransactiononJanuary1,2011,andthereceiptoftheresidualvalueattheendoftheleaseterm.Illustration21-29(January1,2012)Sales-TypeLeases(Lessor)SpecSales-TypeLeases(Lessor)SpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.Illustration:CaterpillarmakesthefollowingentriestorecordthistransactiononJanuary1,2011,andthereceiptoftheresidualvalueattheendoftheleaseterm.Illustration21-29Sales-TypeLeases(Lessor)SpecPresentvalueoftheminimumleasepaymentsmustincludethepresentvalueoftheoption.Onlydifferencebetweentheaccountingtreatmentforabargain-purchaseoptionandaguaranteedresidualvalueofidenticalamountsisinthecomputationoftheannualdepreciation.BargainPurchaseOption(Lessee)SpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.PresentvalueoftheminimumlTheaccountingforinitialdirectcosts:Foroperatingleases,thelessorshoulddeferinitialdirectcosts.Forsales-typeleases,thelessorexpensestheinitialdirectcosts.Foradirect-financinglease,thelessoraddsinitialdirectcoststothenetinvestment.InitialDirectCosts(Lessor)SpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.TheaccountingforinitialdirFASBStatementNo.13

doesnotindicatehowtomeasurethecurrentandnoncurrentamounts.Itrequiresthatforthelesseethe“obligationsshallbeseparatelyidentifiedonthebalancesheetasobligationsundercapitalleasesandshallbesubjecttothesameconsiderationsasotherobligationsinclassifyingthemwithcurrentandnoncurrentliabilitiesinclassifiedbalancesheets.”CurrentversusNoncurrentSpecialAccountingProblemsLO8Describethelessor’saccountingforsales-typeleases.FASBStatementNo.13doesnotGeneraldescriptionofthenatureofthelease.Nature,timingandamountofcashinflowsandoutflowsassociatedwithleases,includingpaymentsforeachofthefivesucceedingyears.Amountofleaserevenuesandexpensesreportedintheincomestatementeachperiod.Descriptionandamountsofleasedassetsbymajorbalancesheetclassificationandrelatedliabilities.Amountsreceivableandunearnedrevenuesunderlease.DisclosingLeaseDataSpecialAccountingProblemsLO9Listthedisclosurerequirementsforleases.GeneraldescriptionofthenatLeasingwasontheFASB’sinitialagendain1973andSFASNo.13wasissuedin1976(beforetheconceptualframeworkwasdeveloped).SFASNo.13hasbeenthesubjectofmorethan30interpretationssinceitsissuance.TheiGAAPleas