Chapter 21 - Accounting for leases. After completing this chapter you should be able to: Explain the nature, economic substance, and advantages of lease transactions, describe the accounting criteria and procedures for capitalizing leases by the lessee, contrast the operating and capitalization methods of recording other contents. | Volume 2 C H A P T E R 21 ACCOUNTING FOR LEASES Intermediate Accounting IFRS Edition Kieso, Weygandt, and Warfield Leasing Environment Who are players? Advantages of leasing Conceptual nature of a lease Accounting by Lessee Accounting by Lessor Special Accounting Problems Capitalization criteria Accounting differences Finance lease method Operating method Comparison Residual values Sales-type leases Bargain-purchase option Initial direct costs Current versus noncurrent Disclosure Unresolved problems Economics of leasing Classification Direct-financing method Operating method Accounting for Leases Largest group of leased equipment involves: Information technology Transportation (trucks, aircraft, rail) Construction Agriculture LO 1 Explain the nature, economic substance, and advantages of lease transactions. A lease is a contractual agreement between a lessor and a lessee, that gives the lessee the right to use specific property, owned by the lessor, for a specified period of time. The Leasing Environment Banks LO 1 Who Are the Players? The Leasing Environment Captive Leasing Independents Credit Suisse (CHE) Chase (USA) Barclays (GBR) Deutsche Bank (DEU) CNH Capital (NLD) (for CNH Global), BMW Financial Services (DEU) (for BMW) IBM Global Financing (USA) (for IBM) Market Share 44% 30% 26% 100% financing at fixed rates. Protection against obsolescence. Flexibility. Less costly financing. Tax advantages. Off-balance-sheet financing. The Leasing Environment LO 1 Explain the nature, economic substance, and advantages of lease transactions. Advantages of Leasing Capitalize a lease that transfers substantially all of the benefits and risks of property ownership, provided the lease is noncancelable. The Leasing Environment LO 1 Explain the nature, economic substance, and advantages of lease transactions. Conceptual Nature of a Lease Leases that do not transfer substantially all the benefits and risks of . | Volume 2 C H A P T E R 21 ACCOUNTING FOR LEASES Intermediate Accounting IFRS Edition Kieso, Weygandt, and Warfield Leasing Environment Who are players? Advantages of leasing Conceptual nature of a lease Accounting by Lessee Accounting by Lessor Special Accounting Problems Capitalization criteria Accounting differences Finance lease method Operating method Comparison Residual values Sales-type leases Bargain-purchase option Initial direct costs Current versus noncurrent Disclosure Unresolved problems Economics of leasing Classification Direct-financing method Operating method Accounting for Leases Largest group of leased equipment involves: Information technology Transportation (trucks, aircraft, rail) Construction Agriculture LO 1 Explain the nature, economic substance, and advantages of lease transactions. A lease is a contractual agreement between a lessor and a lessee, that gives the lessee the right to use .
