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How is business efficiency measured?
An activity ratio measures the relationship between a firm’s level of operations, usually stated in terms of sales (turnover), and the assets needed to maintain the activity, it in...
How is a real estate lease secured?
Residential or commercial real estate in a lease is real property and a mortgage loan to the owner of leased real estate is secured by that real estate. With the funding of real e...
How is a loan’s expected loss determined?
The quality of the credit approval process is determined by the best possible identification and evaluation of the credit risk resulting from a possible exposure. Credit risk is t...
How is a defaulted lease treated?
True leases and nontax leases receive different treatment in bankruptcy. The US Bankruptcy Code distinguishes between a true lease – in which the lessor retains legal ownership –...
How does assignment secure leasing?
Leases are assigned to lenders to facilitate the orderly and more effective enforcement of the security in the leased property. The lessor assigns to lease funders the rights asso...
How do lessors account for leases?
For initial recognition, both US GAAP and IFRS differentiate between finance and operating leases. US GAAP calls for a bright-line test to distinguish between capital and operatin...
How do lessors account for direct-financing and sales-type leases?
The two major differences in the accounting treatment of a direct-financing lease and a sales-type lease are the gain or loss on the sale of the asset – there is no manufacturer’s...
How do lessees classify leases under ASC 842 and IFRS 16?
Lessees are required to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets under both ASC 842 and IFRS 16. The standards cal...
How do lessees classify leases under ASC 840 and IAS 17?
US GAAP (ASC 840) calls for capital lease classification by lessees if the lease term is equal to or greater than 75% of the asset’s economic life or the present value of the lease...
How do lessees account for leases?
For assets under operating leases, lessees recognize neither an asset nor a payment obligation on their balance sheet; instead, lease payments are recorded as expense when due. Be...
