The And Measurement Of Leases

1759 Words Dec 2nd, 2015 8 Pages
Recognition and measurement of leases is an important part of accounting for leasing. Many companies and organizations rely on leasing as a means of acquiring assets without actually owning the asset. Companies often lease land and buildings, company vehicles like trucks for construction, and equipment for manufacturing or a business; like computers, copiers, and printers. Leasing allows for companies to stay in the game when it comes to new technology, so that when new technology comes out, companies will be able to start a new lease with new equipment. While leasing is a popular way of acquiring assets, it’s possible that companies and organization will pay more money for a lease then if the asset had been purchased. Leasing of …show more content…
To begin with, when it comes to lease classification under IFRS, lease classification and initial accounting for leases are determined at the initiation of the lease (IAS 17.13). The date that is used to determine the initiation lease is the earliest date between the lease agreement and the date of commitment to the lease (IAS 17.4). U.S. GAAP says that the lease term begins on the date the lessee takes possession or is given jurisdiction of the leased property, even if that date doesn’t involve any payments being made. The lease begins as soon as operations begin. Therefore, for accounting purposes, the lease term can begin before the leased asset even exists (FSP FAS 13-1, fn 1). An example of a lease term that can begin before a leased asset even exists, would be improvements made to a building or land. When comparing the two, it appears that they are almost similar, but there is a slight difference. IFRS statement about lease classification is plain and simple, lease classification starts when the lease is started and it doesn’t matter when certain criteria are met. When comparing IFRS to GAAP, it is very clear that GAAP is more detailed and pickier about the criteria being met. Therefore because GAAP is more precise and detailed there are no questions or concerns, where IFRS lack of detail on criteria could be confusing and raise questions.

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