TUGAS RINGKASAN MATA KULIAH AKUNTANSI KEUANGAN MENENGAH II ACCOUNTING FOR LEASES
Disusun oleh: Adhiyanto Puji Laksono (F0309002/A)
FAKULTAS EKONOMI UNIVERSITAS SEBELAS MARET 2011
THE LEASING ENVIRONMENT What types of assets are being leased? Any type of equipment can be leased. 100% financing at fixed rates 2. Independents Independents are the final category of lessors. owned by the lessor. Capitalize leases that are similar to installment purchases 2
. followed by assets in the transportation area (trucks. rail). Independents have not done well over the last few years. for an agreed period of time. computers. helicopters. 3. 2. Captive leasing companies Captive leasing companies are subsidiaries whose primary business is to perform leasing operations for the parent company. Less costly financing 5. This arrangement gives the lessee the right to use specific property. Flexibility 4. barges. and so on. Off-balance-sheet financing Conceptual Nature of a Lease The various views on capitalization of leases are as follows: 1. Advantages of Leasing 1. bulldozers. Protection against obsolescence 3. Tax advantages 6. Do not capitalize any leased assets 2. aircraft. such as railcars. The lessors that own this property generally fall into one of three categories: 1. Who Are the Players? A lease is a contractual agreement between a lessor and a lessee. CT scanners.ACCOUNTING FOR LEASES A. and then construction and agriculture. Banks Banks are the largest players in the leasing business. The largest group of leased equipment involves information technology equipment.
determining the lease
. Economic Life Test If the lease period is for a major part of the asset’s economic life. Capitalization is therefore appropriate. In order to record a lease as a finance lease. However. At the inception of the lease. This criterion is not controversial and easily implemented in practice. The lease term is for the major part of the economic life of the asset 4. 2. ACCOUNTING BY THE LESSEE A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. Capitalization Criteria Three of the four capitalization criteria that apply to lessees are controversial and can be difficult to apply in practice. Capitalize non-cancelable leases where the penalty for non-performance is substantial B. The lessee contains a bargain-purchase option 3. Bargain-Purchase Option Test A bargain-purchase option allows the lessee to purchase the leasedproperty for a price that is significantly lower than the property’s expected fair value at the date the option becomes exercisable. Capitalize all long term leases 4. it is a finance lease. 1. The lease transfers ownership of the property to the lessee 2. The IASB identifies the four criteria for assessing whether the risks and rewards have been transferred in the lease arrangement. The present value of the minimum lease payments amounts to substantially all of the fair value of the leased asset. the difference between the option price and the expected fair value must be large enough to make exercise of the option reasonably assured. the lessor transfers most of the risks and rewards of ownership to the lessee. Transfer of Ownership Test If the lease transfers ownership of the asset to the lessee. the lease must be non-cancelable.3. 3. Capitalization Criteria (Lessee) 1.
maintenance. 4. and tax expenses-called executory costs-during their economic life. Determining estimated economic life can also pose problems. especially if the leased item is a specialized item or has been used for a significant period of time. leased tangible assets incur insurance. if provided in the lease agreement. Executory costs do not represent payment on or reduction of the obligation. non-cancelable term of the lease. a bargain-renewal option. Discount Rate A lessee. This rate is defined as the 4
. 3. Executory Costs Like most assets. Bargain-purchase option 2. A bargain-renewal option allows the lessee to renew the lease for a rental that is lower than the expected fair rental at the date the option becomes exercisable. In these cases. the lessor can use the rental payment without adjustment in the present value computation. then a lessee should capitalize the leased asset. can extend this period. Minimum Lease Payments These payments include the following: a. The lease term is generally considered to be the fixed. Many lease agreements specify that the lessee directly pays executory costs to the appropriate third parties. Minimum rental payments b. Penalty for failure to renew or extend the lease d. Determining the present value of the minimum lease payments involves three important concepts: 1. computes the present value of the minimum lease payments using the implicit interest rate. Recovery of Investment Test If the present value of the minimum lease payments equals or exceeds substantially all of the fair value of the asset. However.term and what constitutes the major part of the economic life of the asset can be troublesome. Guaranteed residual payments c.
then the company depreciates it over the term of the lease. the fair value of the leased asset at the inception of the lease. ACCOUNTING BY THE LESSOR Three important benefits are available to the lessor: 1. the company depreciates the asset consistent with its normal depreciation policy for other asset.discount rate that. Depreciation Concept Although the company computes the amounts initially capitalized as an asset and recorded as an obligation at the same present value.
. the company uses the effectiveinterest method to allocate each lease payment between principal and interest. the depreciation of the asset and the discharge of the obligation are independent accounting processes during the term of the lease. it records a finance lease as an asset and a liability at either: 1. Effective-Interest Method Throughout the term of the lease. Asset and Liability Accounted for Differently Asset and Liability Recorded Under the finance lease method. if the lease does not transfer ownership or does not contain a bargain-purchase option. Interest revenue Leasing is a form of financing. C. at the inception of the lease. using the economic life of the asset. Depreciation Period If the lease agreement transfers ownership of the asset or contains a bargain-purchase option. Banks. the present value of the minimum lease payments or 2. causes the aggregate present value of the minimum lease payments and the unguaranteed residual value to be equal to the fair value of the leased asset. The rationale for this approach is that companies should not record a leased asset for more than its fair value. On the other hand. and independent leasing companies find leasing attractive because it provides competitive interest margins. captives.
. Lessors evaluate the same criteria. sales-type leases arise when manufacturers or dealers use leasing as a means of marketing their products. Finance leases may be further subdivided into directfinancing and sales-type leases. Normally. basing it on the rate of return-the implicit rate-needed to justify leasing the front-end loader. the lessor also classifies leases as operating or finance leases. The distinction for the lessor between a direct-financing lease and a sales-type lease is the presence or absence of a manufacturer’s or dealer’s profit (or loss): A sales-type lease involves a manufacturer’s or dealer’s profit. companies that lease cannot use the tax benefit of the asset. Tax incentives In many cases. The lease receivable is the present value of the minimum lease payments plus the present value of the unguaranteed residual value. the lessor records a lease receivable instead of a leased asset. but leasing allows them to transfer such tax benefits to another party (the lessor) in return for a lower rental rate on the leased asset. Classification of Leases by the Lessor For accounting purposes. As with lessee accounting. Economics of Leasing A lessor determines the amount of the rental. if the lease transfers substantially all the risks and rewards incidental to ownership. the lessor shall classify and account for the arrangement as a finance lease. Direct-Financing Method (Lessor) Direct-financing leases are in substance the financing of an asset purchase by the lessee. 3. Lessors classify and account for all leases that do not qualify as directfinancing or sales-type leases as operating leases. High residual value Another advantage to the lessor is the return of the property at the end of the lease term. and a direct-financing lease does not. In this type of lease.2.
4. Internal direct costs are directly related to specified activities performed by the lessor on a given lease. initial direct costs should not include internal indirect costs. Also. for sales-type leases 7
. then it should reduce the rental payment by that amount in computing minimum lease payments. whether guaranteed or not. The residual value is the estimated fair value of the leased asset at the end of the lease term.Thus. SPECIAL ACOOUNTING PROBLEMS The features of lease arrangements that cause unique accounting problems are: 1. recall that if the lesssor pays any executory costs. However. Bargain-purchase options If a bargain-purchase option exists. The accounting for initial direct costs depends on the type of lease: 1. 3. The guaranteed residual value can be considered part of sales revenue because the lessor knows that the entire asset has been sold. Incremental direct costs are paid to independent third parties for originating a lease arrangement. we have generally ignored residual value. the lessor records the residual value. Therefore the lessor recognizes sales and cost of goods sold only for the portion of the asset for which realization is assured. there is a difference in the accounting for guaranteed and unguaranteed residual values. 2. Initial direct costs Initial direct costs are of two types: incremental and internal. Residual values In order to develop the basic accounting issues related to lease and lessor accounting. the gross profit amount on the sale of the asset is the same whether a guaranteed or unguaranteed residual value is involved. But. D. for operating leases 2. However. the lessee must increase the present value of the minimum lease payments by the present value of the option price. there is less certainty that the unguaranteed residual portion of the asset has been “sold”. Sales-type leases (lessor) When recording sales revenue and cost of goods sold.
Avoiding the first three criteria is relatively simple. These requirements vary based on upon the type odf lease (financing and operating) and whether the issuer is the lessor or lessee. Disclosure The IASB requires lessees and lessors to disclose certain information about leases.
. device used by lessees and lessors. but it takes a little ingenuity to avoid the recovery of investment test for the lessee while satisfying it for the lessor. yet popular. Ensure that the lease does not specify the transfer of title of the property to the lessee. Unlike lessees. Arrange for the present value of the minimum lease payments to be sufficiently less than the fair value of the leased property. 2. 4. Set the lease term sufficiently below the estimated economic life of the leased property such that the economic life test is not met. 6. while having the same lease qualify as a finance lease to the lessor. A common method of measuring the current liability portion in ordinary annuity leases is the change-in-the-present-value method. Companies can easily devise lease agreements in such a way. lessors try to avoid having lease arrangements classified as operating leases. The real challenge lies in disqualifying the lease as a finance lease to the lessee. companies design. Do not write in a bargain-purchase option 3.3. by meeting the following specifications: 1. The lessee’s use of the higher interest rate is probably the more popular subterfuge. E. for a direct-financing lease
5. and interpret lease agreements to prevent satisfying any of the four finance lease criteria. Current versus non-current classification IFRS does not indicate how to measure the current and non-current amounts. The residual value guarantee is the other unique. LEASE ACCOUNTING-UNRESOLVED PROBLEMS To avoid leased asset capitalization. write.