Group writing assignment for leasing

Document Type:Coursework

Subject Area:Accounting

Document 1

This model thus has been criticized by the stakeholders because of its failure to meet the requirements of financial statement users and do not also faithfully show leasing transactions. Because of these reasons, FASB (financial accounting standards board) and IASB (international accounting standard board) began a project in 2006 that was directed to thoroughly restructure the existing lease accounting principles for both lessors and lessees. Because IASB and FASB had worked together in the past leases project, several requirements in the two bodies align, which includes requiring lease liabilities and lease assets to be on the balance sheet in addition of the disclosures to be shown clearly. However, there exist significant differences (McCarthy et al 32). One significant distinguishing figure between the two bodies relates to lease classification.

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If for instance, a lessor has terms with direct financing lease company, the profit after selling at the start of the date will be included in the calculations of net investment which will be caught from the lease (Zeff & Stephen 150). For all the finance leases, selling profit will be known at the beginning of the lease. In this case, has two divisions of classifying a lease under IFRS, these are finance and operating lease. The two bodies do differ in the definition of a lease. Under the US GAAP, the description of a lease is particular to known property, equipment or plant. ASU needs that the first lessee that do the subleasing of an underlying asset, thus in the process becoming a sublessor, in determining the categorization of the sublease in reference to the leased asset in the initial lease.

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IFRS will, in this case, require the sublessor in determining the subleasing categorization in referenced to a right-of-use asset which comes from the initial lease (Easton et al 67). Some arrangements of the lease have different lease payments which depend on rate, or index which includes CPI (consumer price index) or using the London interbank offered rate. Organizations are needed to treat these variable lease payments first at the rate or index on the date which the lease commenced. However, the re-measurement of these lease payments differ from these accounting bases. 89 Zeff, Stephen A. "The Trueblood Study Group on the objectives of financial statements (1971–73): A historical study. " Journal of Accounting and Public Policy 35. McCarthy, Mary, Michelle Kusaila, and Lawrence Grasso. "Intermediate accounting and auditing: Does course delivery mode impact student performance?.

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