StudentShare solutions
Triangle menu

Leases. Principles for Financial Reporting, ASB - Essay Example

Nobody downloaded yet
Operating leases are known to be one of the off-balance sheet obligations; therefore, the placement of lease accounting continues to be one of the priorities for Financial Accounting Standard Board (FASB) and the International Accounting standards Board (IASB). During March 2009, these boards issued paper referred to as Leases: “preliminary view” which clearly outlined the proposal for new global lease accounting standards. The proposed standards would need the replacement of all operating leases with the capital leasing thus, triggering a shift of billions of dollars to the balance sheet across North America which was estimated that 70% of the total lease value would be capitalized if it involves commercial real estate. Then the end result of these change of the magnitude will be vast shift rippling through all financial reporting, the processes and merits across all us and global industries. Introduction: In the current UK accounting standard, it is important to understand that for any accounting purpose leases are generally classified as being either financial or operating standards: First, the word lease simply means an agreement between two parties involving a hiring of asset. The lesser is a legal owner who lets out the asset to the lessee and then at the end of the lease, the asset is returned to the lesser; The only thing that the lessee will do, is to continually pay a lease rental to the lesser for using the assert. Under the SSAP 21, the term financial lease is defined as any lease contract that transfers substantially all the risk as well as the reward of ownership to the lessee, There is a reputable presumption that if, at the inception, the total percent value of a minimum lease payment amounts to at least 90% or even more of the value of the leased asset (Patterson, R., 2002). In order to rebut this presumption, the preparers of financial statement might consider looking for other indications about the risks as well the rewards, though rebuttal is usually expected only to happen in exceptional circumstances. On the other than, operating lease, is that type of lease where risk and reward of ownership of the assets remain with the lesser concerns regarding off-balance sheet nature for operating lease, different treatment of similar transaction as well as the whole approach have lead to many standards-setting bodies to treat leases consistently. Accounting treatment for leases: Accounting treatment for operating lease: It is generally very easy and straight forward for both the lesser and the lessee. Under operating lease, the lessee is the one who incurs the operating expenses, thus, lease rental payable are written off in the profit and loss account (Alexander, D., Britton, A., & Jorissen, A., 2005). This must to be disclosed in the notes to the account showing the amount charged in the year as well as those of payment which the firm is committed at the end of each year. The leaser continues to earn revenue out of renting out the asset and accordingly recognizes the amount of lease rental receivable as an income in the profit and loss account. Accounting treatment of financial lease by the lessee: When any lessee enters into a financial lease, then it gets access to the risk and rewards of the asset and therefore, the lessee reflects the substance by recognizing all assets leased in separate accounts which is also consistent with the ASB’s statement of principle which defines recognition criteria of assets. Then the lessee capitalizes the present value of all the minimum lease payments as fixed assets and the amount is recorded as a liability (Bircher, P, 2006). The PV of minimum lease pay ...Show more


Leases. Principles for Financial Reporting, ASB.
Off-balance sheet arrangement have long been the main concern of all accounting regulators and the economic consequences related to these items have prompted these regulators around the globe…
Author : jarvis50
Leases. Principles for Financial Reporting, ASB essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Leases. Principles for Financial Reporting, ASB"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Hire purchase contracts and Lease in business and how they work
The following study discusses the various methods by which leases are presently differentiated and accounted for in accordance with SSAP 21, the reason and content of ASB statement of codes, the criticism of the approach adopted by the present accounting standard and at last the amendments to the current accounting standard which have been proposed in light of this criticism.
6 pages (1500 words) Essay
Financial Reporting
Here it has been highlighted as to whether the company complied with any revisions or changes in accounting standards like AASB 101; and other accounting standards relating to intangible asset; provisions and contingent items etc. Any change adopted by the company in financial reporting for 2009 over the previous year has also been discussed.
10 pages (2500 words) Essay
Financial Reporting
Through financial statements, management provide the details of the accounts and any explanations and details which become part of the accounts as to how the different issues were treated and under what circumstances. Financial reporting however is based upon the combination of the international accounting standards as well as the local rules and regulations thus requiring firms to report their accounts according to the laid down standards and regulations.
4 pages (1000 words) Essay
Financial Reporting and Accounting
l for cost-based payments. (Encyclopedia Britannica, 2007) The aim of this paper is to critically compare and contrast the accounting methods, structure and regulation in Canada with the UK including a critical and detail analysis of both current issues and academic literature surveyed relevant to the country.
12 pages (3000 words) Essay
Financial Reporting
External Reporting to investors, government authorities and other outside parties on the organisation's finance position, operations and related activities. This information is also used by regulatory bodies like Internal Revenue Service. Sometimes the managers in other organization also use such information in their decision making.
6 pages (1500 words) Essay
Financial Reporting
There are two important methods of analysis of financial statements, these can be classified into: a) Horizontal Analysis: this type of analysis of the financial statements is when the
10 pages (2500 words) Essay
Moreover, major implications of adopting IFRS for financial reporting have been discussed. To some extent, the argument of enhanced quality of financial reporting
12 pages (3000 words) Essay
Financial Reporting
Through financial statements, management provide the details of the accounts and any explanations and details which become part of the accounts
4 pages (1000 words) Essay
ASB 2104 Principles of Organisation and Management
The most noteworthy of these views have taken the form of management theories. Management practitioners benefit from these theories as they are relevant, in varying degrees, even today. While a few aspects of some theories overlap, others are radically
8 pages (2000 words) Essay
Under the finance lease, all the risks and rewards that come with ownership are transferable to the lessee. To the lessee, it forms both an asset and liability while to the lessor it is a receivable. On the other hand, operating leases form an expense to the
5 pages (1250 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Let us find you another Essay on topic Leases. Principles for Financial Reporting, ASB for FREE!
Contact us:
Contact Us Now
  • About StudentShare

  • Testimonials

  • FAQ

  • Blog

  • Free Essays
  • New Essays
  • Essays

  • The Newest Essay Topics
Join us:
Contact Us