BonneSante S Essay

657 Words May 17th, 2015 3 Pages
James Huang
Professor Lau
ACCT 495
May 2, 2015
BonneSante S.A.

1. How well do the chief accountant’s assumed lease characteristics line up with the company’s past lease term experience?
Illustration 1:
The truck lease would be accounted for as a regular equipment lease with the interest every month.
Truck Rental Expense 800
Interest Expense 40 Cash 840
Illustration 2:
If we determine the probability of lease terms, for 60% the lease will be for 6 years, so we will use 6 years as the lease term. Then the initial direct cost is factored into total of 72 months, which will be 83 a month. Then we use the PV of the future payments to find out the amount paid over the lease term for the first 5 years and for the last renewed year because
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3. What role does management judgment play in determining the lessee right-of-use asset and lease liability amounts?
Because it is a future incurred payment and they might not know if the lease will continue after the 5 year lease, they have to:
1. identify each reasonably possible outcome
2. estimate the amount and timing of each outcome
3. determine probability of the outcome
4. estimate the ability to make lease payments at the PV of lease payments, included discounted incremental borrowing rate
5. measure the right-of-use asset at the amount of the liability to make lease payments, plus any initial direct costs incurred by the lessee

4. How might the ED’s proposed lessor accounting influence, if at all, the lessor’s preferences for particular lease provisions in the BonneSante leases?
a) If direct method is applied, the lessor shall present those cash receipts separately from other cash flows from operating activities
b) If indirect method is applies, the lessor shall present changes in the right to receive lease payments separately from the changes in other operating receivables

5. Compared to your understand of the IFRS lessee accounting rules in place in August 2010, do you believe the ED proposals represent a significant improvement? Explain.
Yes. Because it allows the investors to see the true financial position of these companies, it is useful for all companies to adopt the new

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