Pm-F5

Front 1

Note

Back 1

FV equal 1/PV

Front 2

Note

Back 2

If there is a period between the lease contract signature & the payment of the first annuity then the first annuity (lease payment) consists of a principle portion & an interest portion

Front 3

Note

Back 3

When the seller-lessee transfers substantially all the risks of
ownership, any gain resulting from the sale should be recognized rather than being deferred, but Recognition of the gain should be deferred when the seller-lessee retains the right to substantially all of the remaining use of the property.

Front 4

Note

Back 4

Real Estate taxes is considered from executory costs which should be excluded from the PV of the annual lease payments

Front 5

Note

Back 5

While calculating the profit of the lessor from the capital lease we should choose the FV or the PV (which ever is lesser) to subtract from it the CV of the leased asset

Front 6

Note

Back 6

Under U.S GAAP the sale-leaseback retained portion is calculated by dividing the PV of the lease payments by the FV of the asset sold

Front 7

Note

Back 7

In a sales-type lease the straight line depreciation expense is calculated as the PV of min lease payments divided by the lease term regardless of the cost or the FV of the asset

Front 8

Note

Back 8

Under IFRS, If a sale-leaseback transaction results in a finance lease, any profit from the sale-leaseback transaction is deferred & amortized over the lease term .

Front 9

Note

Back 9

If the leases question didn't state the timing of the first lease payment then we should consider that there is a period between the contract signature date & the first lease payment date

Front 10

Note

Back 10

When the lease in an IFRS sale-leaseback transaction
is classified as an operating lease & the sales price is equal to the FV of the leaseback asset, any profit or loss is recognized immediately

Front 11

Note

Back 11

The amount of the asset on the B/S is the carrying amount

Front 12

Note

Back 12

Under IFRS, recognition of a gain resulting from a sale-leaseback
transaction should be deferred & subsequently amortized if the lease is classified as a finance lease, or the lease is classified as an operating lease & the sales price is above FV.

Front 13

Note

Back 13

The lessor of a capital lease did not depreciate the asset

Front 14

Note

Back 14

Rule: In a sales-type (finance) lease, the difference between the FV of the leased asset & its cost at inception is recognized as manufacturer's or dealer's profit

Front 15

Note

Back 15

In case of bonds issued between interest dates the accrued interest should be calculated based on the bond face value & not the CV

Front 16

Note

Back 16

In case of bonds issued between interest dates the accrued interest is recorded separately from the Bonds payable amount by crediting the interest expense (payable) account

Front 17

Note

Back 17

"Bond interest expense for the current year" means the total amount of interest that relates to the whole year from the time of issuance & not the one that relates to the period ending at the end of the year

Front 18

Note

Back 18

Gain (Loss) on Bonds retirement = Reacquisition price - CV

Front 19

Note

Back 19

Bond issue costs are amortized using the straight line method

Front 20

Note

Back 20

Bond retirement CV used = Face value - unamortized discount - unamortized bond issue cost (GAAP)+ unamortized premium

Front 21

Note

Back 21

The bond unamortized discount or premium amortization begin from the date of purchase & not from the date of issuance

Front 22

Note

Back 22

The interest rate on convertible debt is generally lower than
nonconvertible debt because of the value of the conversion feature.

Front 23

Note

Back 23

Either Warrant only method or Market value method used for accounting for detachable warrants allow the recording of discount or premium at issuance of bonds

Front 24

Note

Back 24

Under U.S. GAAP, all costs associated with the issuance of bonds should be capitalized & amortized over the outstanding term of the bonds since issue.

Front 25

Note

Back 25

At the time the warrants are exercised total shareholders
equity is increased by the cash received upon exercise of the warrants, but not by the carrying amount of warrants.

Front 26

Note

Back 26

Debenture bonds is the total amount of the unsecured bonds Regardless of anything else

Front 27

Note

Back 27

Beginning balance of Bond CV = Ending value of bond CV - Discount Amortization (plus Premium amortization)

Front 28

Note

Back 28

Rule: Capital leases should be recorded as both an asset & liability at the present value of the minimum lease payments. The asset is depreciated. The liability is amortized using the interest method. Each payment is allocated between principal & interest. The liability is reduced by the amount of principal reduction. The capitalized lease liability should be segregated between current (due within one year) & non-current (due beyond one year) . Accordingly, the reduction in lease liability each year is equal to the current liability at the end of the previous year.

Front 29

Note

Back 29

The entire refundable security deposit is recorded in total till the end of the lease term

Front 30

Note

Back 30

The retirement loss can't be deferred

Front 31

Note

Back 31

Sinking funds do not decrease by purchasing investments

Front 32

Note

Back 32

If the borrower place cash in an irrevocable trust, he will NOT be considered legally released from the obligations under the bond agreement, however he can't report gains or losses on extinguishment of that debt

Front 33

Note

Back 33

Rule: Bonds or notes due within one year are shown as " noncurrent if the issuer has the intent & ability to refinance with a new issuance of long-term debt. This intent & ability must usually be demonstrated through refinancing of the debt after the B/S date, but before the issuance of the FSs. Separate disclosure of the refinancing is required.

Front 34

Note

Back 34

There is no interest component for an "operating lease."

Front 35

Note

Back 35

The current asset that is used to pay for non current liability should be classified as non current asset

Front 36

Note

Back 36

Rule: For operating leases having remaining lease terms in excess of one year, the future minimum rental payments (ONLY) required as of the last BS date should be disclosed in the aggregate & for each of the next five succeeding years.

Front 37

Note

Back 37

Rule: Discount or premium on the sale of bonds is included in the CV of the bonds on the B/S.

Front 38

Note

Back 38

In a sales-type lease, cost of goods sold is equal to the historical cost of the asset sold less the present value of the non-guaranteed residual value discounted over the life of the lease.

Front 39

Note

Back 39

Rule: According to IFRS any profit on a sale-leaseback which is classified as a capital (finance) lease should be deferred & amortized in proportion to depreciation taken on the leased-back asset

Front 40

Note

Back 40

The market value of a bond issued at a discount (or a premium) is the present value of two cash flows.
1 . The present value of the principal amount, plus,
2. The present value of all future interest payments,
3. Both at the market (effective) rate of interest

Front 41

Note

Back 41

FV of an equipment is the PV of the future cashflows

Front 42

Note

Back 42

Since the lease bonus is nonrefundable, it represents income attributable to the lease term. Therefore, recognition is deferred & recognized equally over the life of the lease.

Front 43

Note

Back 43

Separate disclosure of refinancing short-term bonds on long-term basis is required.

Front 44

Note

Back 44

Real estate taxes (Executory cost) should be excluded from lease payments & expensed immediately

Front 45

Note

Back 45

A sinking fund for the retirement of the bonds, Increases by revenue earned on the investments & did not Decrease when the investments are purchased

Front 46

Note

Back 46

Income for discount is cash + discount amortization, while income for premium is cash - premium amortize which makes income under discount higher