Chapter 21 - Accounting for leases. In this chapter students will 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 leases. | PREVIEW OF CHAPTER Intermediate Accounting IFRS 2nd Edition Kieso, Weygandt, and Warfield 21 Describe the lessor’s accounting for direct-financing leases. Identify special features of lease arrangements that cause unique accounting problems. Describe the effect of residual values, guaranteed and unguaranteed, on lease accounting. Describe the lessor’s accounting for sales-type leases. List the disclosure requirements for leases. After studying this chapter, you should be able to: Accounting for Leases 21 LEARNING OBJECTIVES 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 leases. Explain the advantages and economics of leasing to lessors and identify the classifications of leases for the lessor. Largest group of leased equipment involves: Information technology equipment Transportation (trucks, aircraft, rail) Construction Agriculture 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 LO 1 Who Are the Players? ILLUSTRATION 21-2 What Do Companies Lease? Banks 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% Who Are the Players? THE LEASING ENVIRONMENT Captive Leasing Companies LO 1 100% financing at fixed rates. Protection against obsolescence. Flexibility. Less costly financing. Tax advantages. Off-balance-sheet financing. Advantages of Leasing LO 1 THE LEASING ENVIRONMENT OFF-BALANCE-SHEET FINANCING Capitalize a lease that transfers substantially all of the benefits and risks of property ownership, provided the lease is non-cancelable. Conceptual Nature of a Lease Leases that | PREVIEW OF CHAPTER Intermediate Accounting IFRS 2nd Edition Kieso, Weygandt, and Warfield 21 Describe the lessor’s accounting for direct-financing leases. Identify special features of lease arrangements that cause unique accounting problems. Describe the effect of residual values, guaranteed and unguaranteed, on lease accounting. Describe the lessor’s accounting for sales-type leases. List the disclosure requirements for leases. After studying this chapter, you should be able to: Accounting for Leases 21 LEARNING OBJECTIVES 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 leases. Explain the advantages and economics of leasing to lessors and identify the classifications of leases for the lessor. Largest group of leased equipment involves: Information technology equipment Transportation (trucks, aircraft, .
