Explain why companies frequently choose to lease assets and describe the basis for each of the criteria used to classify leases.
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Q: Explain the basis for each of the criteria used to classify leases
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Explain why companies frequently choose to lease assets and describe the basis for each of the criteria used to classify leases.
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- Explain the concept of accounting for leases and the criteria used to determine whether a lease should be classified as an operating lease or a finance lease. Discuss the implications of lease accounting on a company's financial position and performance.Identify the lease classifications for lessors and the criteria that must be met for each classification. What is the relevance of revenue recognition criteria for lessor accounting for leases?Summarize the GAAP versus IFRS existing and pending (if any) requirements for accounting for leases.Reflect knowledge of both the principles and standards of each and include any relevant information that impacts accounting for leases.
- Explain the basis for each of the criteria used to classify leasesWhy is the reporting of leases required? Justify your response.Which of the following is a required financial statement presentation by a lessee for both capital leases and operating lease? A. Amortization Expense and Interest Expense B. Lease Expense C. Right-of-Use Asset and Lease Liability D. The reduction of the Lease Liability as a financing activity
- What are the criteria for classifying a lease as operating or capital? Why is there a difference between the two? What are the implications of an operating lease versus a capital lease on an entity’s financial statements?Where can authoritative IFRS related to the accounting for leases be found?Outline the accounting processes necessary for a lessee to use the operating lease technique.
- Discuss the accounting and reporting for special features of lease arrangements.Explain the accounting for operating leases.For companies that prepare their financial statements in accordance with both U.S. GAAP and IFRS, a lease is deemed to be a capital lease (usually called a finance lease under IFRS) if substantially all risks and rewards of ownership are transferred. In making this distinction, less judgment, more specificity is applied using a. IFRS. b. U.S. GAAP. c. Either U.S. GAAP or IFRS. d. Neither U.S. GAAP nor IFRS.