Lease (PAS 17) an agreement whereby the lease conveys to the lessee in return for payment or series of payments

s the right to use and asset for an agreed period of time *lease payments under an operating lease shall be recognized as an EXPENSE on a straight line basis OVER THE LEASE TERM Lease bonus treated as prepaid rent expense by the lessee to be amortized over the lease term Leasehold improvements shall be depreciated over the life of the improvements or lease term WHICHEVER IS SHORTER Security deposit refundable upon the lease expiration is accounted for as an asset by the lessee. Operating lease lessor bears all ownership or executor costs such as depreciation of leased property, real property taxes, insurance and maintenance. Initial direct costs added to the carrying amount of the leased asset and recognized as an expense over the lease term by the lessor Sale and leaseback arrangement whereby one party sells a property to another party then immediately leases the property back from its owner Rules on leaseback: 1. If sale is clearly established at fair value (sales price=FV), gain or loss is recognized immediately 2. If sales price<FV, gain or loss is RECOGNIZED IMMEDIATELY. BUT if loss is compensated by future lease payments at BELOW MARKET VALUE, loss is deferred and amortized over the period of the expected use of the asset. 3. If SP>FV, gain is amortized over the period for which the asset is expected to be used. 4. If leaseback is a finance lease, any gain on sale is DEFERRED and amortized over the LEASE TERM. But any loss on sale is RECOGNIZED IMMEDIATELY.