中级会计学英文版课件：ch18 Leases.ppt

Chapter 18
Leases
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. 18-1. Evaluate the economic substance of a leasPE is referred to as a “capital lease”
For a lessor, a “capital” lease (under ASPE) has normal credit risk and no material unreimbursable costs
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Accounting Impact of Types of Leases
Operating lease – Lessee expenses cost of lease in period benefit is received
Finance lease – lessee records an asset for property being used and a liability for the obligation to make payments
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Risk and Rewards and Lease Classification
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Stages in Accounting for Leases
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CHECKPOINT CP 18-1
What is the Key issue in Accounting for Leases?
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B. ECONOMICS OF LEASING (. 18-1)
Advantages of leasing:
“100%” financing of asset’s purchase price
Payment schedules more flexible vs. loans
Operating lease treatment results in off-balance-sheet financing for lessee
Lower after-tax costs due to differences in tax rates for the lessor and lessee
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Disadvantages of Leases
User who controls the asset during the lease is not the owner of the asset
Reduced level of care due to separation of an asset’s ownership and its control (agency cost)
Lease will lower the property’s value at the end of the lease to an amount below what it would be without the lease
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Agency Cost of Leasing
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Degree to which Agency Cost Matters
Depends on a number of factors:
1. Inherent nature of the asset that is leased
2. Incentives of the lessee to maintain the condition of the leased asset
3. Regulations that require a high degree of care
4. Conditions negotiated between the lessor and lessee, including Bargain purchase option, and
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