Criteria used to determine if a lease is classified

Related BrainMass Solutions

• Financial Accounting Explanations

  If any one of the criteria is met, a lease should be classified as capital lease. So according to the first criteria, the lease term (5yrs) is more than 75% of the assets useful life (6yrs), the lease should be classified as capital lease.

• Financial Accounting Standards Board Memo

  An operating lease is used to acquire equipment on a relatively short term (See FAS 13). On the other hand, if the lease satisfies any of the four criteria it is a capital lease.

• A Noncancelable Lease is Classified as a Capital Lease

  226974 A Noncancelable Lease is Classified as a Capital Lease On January 1, 2006, Lani Company entered into a noncancelable lease for a machine to be used in its manufacturing operation.

• noncancelable lease

  On the other hand if the lease is classified as capital lease the present value of the lease expense is treated as debt and the interest on this amount is shown as expense on the income statement.

• Lease Classification: U.S. GAAP Versus IFRS

  Section 7 of Statements of Financial Accounting Standards No. 13, "Accounting for Leases," states that "If at its inception ... a lease meets one or more of the following four criteria, the lease shall be classified as a capital lease by the lessee.

• Explain how Von Company should classify each of two leases

  That is enough to "toggle" it to be closer to owning than renting. Your tutorial is 288 words and explains the four criteria, the reason for capitalizing in general and how the two leases should be classified and why.

• Lease Classifications

  In a direct financing lease, the lessor is acting purely as a financial intermediary. A sales-type lease is used by a manufacturer or a dealer as a means of selling a product.

• Classifying Assets as Capital or Operating

  lease is a financing transaction called a capital lease if it meets any one of four specified criteria; if not, it is an operating lease.

• Describe how Calliope's accounts and financial statements would be affected if the company decides to lease the noncurrent assets needed to expand the business.

  The present value of the minimum lease payments equals or exceeds 90% of the fair value of the property. If none of the criteria are met then lease is classified as operating lease.