Case 11-6 Lessee Ltd. Case 11-6 deals with Lessee Ltd.‚ a company that operates in Britain and uses IFRS. The question in this case is how to classify a lease that Lessee‚ Ltd. acquired from Lessor Inc. The accounting standard that deals with leases under IFRS is IAS 17. IAS 17 was originally issued in September 1982 and was reissued in December 2003. It classifies leases as either finance leases or operating leases. Finance leases make it so that the lessee recognizes an asset and a liability
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CASE 11-6: LESSEE LTD Caleb Aytes Brayden Hudson Brian Laws Katie Vittetoe Topics To Be Discussed • • • • Relevant Facts of the Case IFRS US GAAP Real World Relevant Facts of the Case • Lessee Ltd. – British Company that applies IFRS – Leases equipment from Lessor Inc. – 3 years – No purchase or renewal options & equipment reverts back to Lessor when lease expires – Remaining useful life = 4 years – Guaranteed Residual Value of $20K Accountants Analysis Relevant Questions 1. Was the junior
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Case 11-6 Lessee Ltd. Lessee Ltd.‚ a British company that applies IFRSs‚ leased equipment from Lessor Inc. on January 1‚ 2007‚ for a period of three years. Lease payments of $100‚000 are due to Lessor Inc. each year. Other expenses (e.g.‚ insurance‚ taxes‚ maintenance) are also to be paid by Lessee Ltd. and amount to $2‚000 per year. The lessor did not incur any initial direct costs. The lease contains no purchase or renewal options and the equipment reverts back to Lessor Inc. on the expiration
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| Lessee Ltd.- Lease Case | | | | | | 1. Was the junior accountant’s analysis correct? Why or why not? No‚ the junior accountant’s analysis is not correct in classifying the lease as an operating lease in accordance with IFRS. Whether or not a lease is classified as a finance or an operating lease depends on if all of the benefits as well as risks of ownership have been shifted from the lessor to the lessee. According to IAS 17-10(d)‚ a lease must be classified as a finance
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1. Is Eye Vision’s arrangement with Holland Hospital within the scope of ASC 985-605‚ Software: Revenue Recognition? In this case‚ the main content of the Eye Vision’s arrangement with Holland Hospital include embedded software medical equipment and an initial option to purchase a two-year separately priced maintenance agreement. In this case‚ because“Eye Vision has never sold‚ nor does it offer to sell‚ the Clear View Laser without the embedded software because the software is necessary to perform
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part‚ hereinafter called the lessee‚ both of said county and state witnessed: That the lessor‚ in consideration of the agreements and covenants hereinafter mentioned to be fulfilled by the lessee‚ both hereby demise and lease to the lessee‚ his heirs‚ executors‚ and administrators‚ for the period of ____________________. The following describe the land and premises‚ 2943 Audrey Drive‚ Gastonia‚ 28054. The total rent during said terms shall be $____________‚ lessee agrees to pay in ____ payments
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11 Service Department and Joint Cost Allocation Solutions to Review Questions 1. Companies allocate costs to estimate or assess the costs of their activities (products‚ processes‚ etc.). It is an estimate and subject to the problem that cost allocation contains an arbitrary element. Not allocating costs‚ however‚ is also an estimate—an estimate of zero. This may be appropriate for some decisions‚ but not for others. Some of the disadvantages (costs) include: (1) Additional
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CAPITAL BUDGETING PROBLEMS: CHAPTER 11 Answers to Warm-Up Exercises E11-1. Categorizing a firm’s expenditures Answer: In this case‚ the tuition reimbursement should be categorized as a capital expenditure since the outlay of funds is expected to produce benefits over a period of time greater than 1 year. E11-2. Classification of project costs and cash flows Answer: $3.5 billion already spent—sunk cost (irrelevant) $350 million incremental cash outflow—relevant cash flow $15 million per year cash
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Introduction Progressive Waste Solutions LTD (PWS) was founded in 2001 and its headquarters can be located in Vaughan‚ Canada serves as a vertically integrated Waste Management organization. Its main purpose within the industry is to collect and dispose of commercial‚ industrial‚ municipal and residential non-hazardous waste. Previously operating as IESI-BFC LTD‚ PWS incorporated back in May 2009 which proved to be a positive step into its plan of vertical integration. Looking to further integrate
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11 Balanced Three-Phase Circuits Assessment Problems AP 11.1 Make a sketch: We know VAN and wish to find VBC . To do this‚ write a KVL equation to find VAB ‚ and use the known phase angle relationship between VAB and VBC to find VBC . VAB = VAN + VNB = VAN − VBN Since VAN ‚ VBN ‚ and VCN form a balanced set‚ and VAN = 240/ − 30◦ V‚ and the phase sequence is positive‚ VBN = |VAN |//VAN − 120◦ = 240/ − 30◦ − 120◦ = 240/ − 150◦ V Then‚ VAB = VAN − VBN = (240/ − 30◦ ) − (240/ − 150◦ ) = 415.46/0◦ V
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