Accounting for Leases and Accounting for Provisions. - Assignment Example

Extract of sample
Accounting for Leases and Accounting for Provisions.

The present value is arrived at after discounting the lease payments based on the interest rate that is associated with the lease payments. Similarly, in the lessee books of accounting the periodic lease payments should be apportioned between the reduction of the current liability and the finance charges. This is done so as to reduce the amount of interest that is paid by the lessee on the regular lease payments. Another significant aspects that lessee should consider is the depreciation of the assets leased. According to IAS-17, the depreciation of property held under lease should be similar to those assets that are owned. However, if it is uncertain that the lessee will own the property, the life of the property or the lease term whichever is lower is considered during the depreciation (Carpenter et al, 1994).
One of the key aspects that characterize a lease is that the lessee purchases an asset from a lessor. However, instead of paying cash, it is deemed that the purchase is financed with a loan that is given by the lessor. In this regard, the lessees are supposed to include the loan interest on the lease payments thus decreasing the lease liability. This is computed as follows. ...
Download paper

Summary

One of the key aspects that characterize a lease is that the lessee purchases an asset from a lessor. However, instead of paying cash, it is deemed that the purchase is financed with a loan that is given by the lessor…
Author : bmurazik
Download 1

Related Essays

Advanced Financial Reporting - Prevalence of Creative Accounting
This report will be evaluating the reasons that give rise to creative accounting by organizations; the grounds for the nativity of this practice will also be discussed. The evaluation of the efforts made by existing standards and accounting practices in controlling and reducing aggressive accounting will be catered in the report. The levels of success achieved by regulatory bodies will also be discoursed. Increasing the complexity of accounting treatments in such a creative and aggressive way, actually results in deviation from the actual spirit of the suggested treatment. Transactions are...
11 pages (2761 words) Essay
Islamic Accounting: Ijarah Contract
There can be various types of Ijarah contracts which have been discussed in this study. The features of Ijarah contracts have also been studied in details. Although Ijarah contracts are similar to leasing contracts, still some differences exist. Accounting and Auditing Organisation for Islamic Financial Institutions, (AAOIFI), sets out standards for accounting of Ijarah contracts. The impact of International Financial Reporting Standards (IFRS) on Ijarah contract accounting has also been discussed in this study. Ijarah Contracts Ijarah It means leasing. It includes a contract where the...
10 pages (2510 words) Essay
The current debate and developments in accounting for leases for lessees
This report provides the discussion regarding the reasons behind aforesaid changes in standards. Maintaining focus from the lessee point of view, this report puts together the new proposal for lessees regarding the ‘right to use’ model. Moreover, it will discuss the impact of proposed changes on the companies worldwide using international standards in the preparation of their financial statements. INTRODUCTION Lease is essentially a form of rental agreement where the owner (lessor) receives rentals from lessee. Corresponding to mentioned rentals, lessee gains right to use the assets (EZ...
10 pages (2510 words) Essay
Accounting for Leases
This assignment focuses on the alternative treatments which the lessee might adopt. Two, it looks into the current accounting treatment of leases. Finally, it will look into the impact of the proposed lease standards on the users of financial statements. a) Three alternative accounting treatments which might be adopted when lessees account for lease transactions. The lessee capitalizes an asset or a liability in the balance sheet using amounts equal to the present value of the rental payments. Generally, there is four criteria’s used in capitalization of lease payments (Nikolai, Bazley and...
6 pages (1506 words) Assignment
Financial Accounting coursework
Thus the accrual method of accounting measures the position and performance of the company based on the transactions made in the course of business irrespective of the cash receipts and payments done for the business transaction. The accrual method of accounting combines the current and expected cash inflows and outflows to determine the consolidated financial position of the company (Sofat and Hiro, 2008, p.36). Marks and Spencer has used the accrual method to determine the expected value of the cash flows based on the historical sales returns so that the accrued figures could be allocated...
5 pages (1255 words) Essay
'Leases' and its impact on the financial position and performance of companies
Exposure Draft ED/2013/6 'Leases' and its impact on the financial position and performance of companies
...
6 pages (1506 words) Essay
Managment Accounting
This paper descusses from the above discussion, it can be affirmed that the present business scenario is incessantly changing due to gaining momentum of globalisation and prevalence of extreme business market competition. In this changing business market conditions, organisations are required to develop appropriate strategies and plans in order to maintain sustainable growth and performance. The arts sector in England is surrounded with certain threats that include operational inefficiency and ineffective allocation of financial resources within the context of competitive business environment....
8 pages (2008 words) Essay
Got a tricky question? Receive an answer from students like you! Try us!