Leasing is nowadays an established part of the economy as an investment alternative. These figures are promising for the German market, but also comparable with the US. There the share of the investment market accounted for by leasing remained at over 30 percent for years. Due to the financial crisis this rate decreased, but it's rising again. In spite of the crisis leasing expanded its top position as an alternative to the classic bank loans over the past 50 years. Recognized as key engine of innovations, it even assures sufficient financial cushion for investments and contributes to growth dynamics in economies.
But what exactly is leasing? There is no generally applicable definition of leases, but in its simplest form, it can be described as provision of access to finance. Leasing object can be anything as classical as machines or real estates, but also intangible assets as software or trademark rights. Leases are an important instrument of accounting policies for entities. In many sectors appropriate equipment is not bought, but leased.
Therefore and because of the globalization of capital markets an increasing convergence of accounting standards worldwide is accelerated. The progress toward attaining a global financial reporting framework is focused, and many significant steps have been taken. One of them is the Exposure Draft ED/2013/6. The ambition of it was to guarantee transparency of financial statements as source of information for their readers of financial statements who can be managers, investors, financial auditors but also a big range of stakeholders. Reasons for revising was that the lease accounting model has continually met with criticism. Objective of the following term paper is to provide an overview of the current lease accounting standard.
Table of Contents
- 1 Introduction
- 2 Accounting for leases IAS 17
- 2.1 Scope
- 2.2 Classification of leases
- 3 Finance leases
- 3.1 Lessor
- 3.2 Lessee
- 4 Operating leases
- 4.1 Lessor
- 4.2 Lessee
- 5 Sale-and-lease-back
- 6 Significant differences in contrast to HGB and US-GAAP
- 7 Conclusion
Objectives and Key Themes
This paper aims to provide an overview of lease accounting under IAS 17. It examines the classification of leases (finance and operating), the roles of lessors and lessees in each type, and the specific considerations of sale-and-lease-back transactions. The paper also highlights key differences between IAS 17 and other accounting standards.
- Classification of Leases (Finance vs. Operating)
- Roles and Responsibilities of Lessors and Lessees
- Sale-and-lease-back Transactions
- International Accounting Standards (IAS 17)
- Comparison with other Accounting Standards (HGB and US-GAAP)
Chapter Summaries
1 Introduction: This introductory chapter establishes the significance of leasing within the global and German economies, citing statistics on the substantial value of goods and services financed through leasing. It defines leasing in its simplest form as providing access to finance, referencing IAS 17's definition. The chapter emphasizes the importance of leasing as an accounting policy instrument and the increasing need for convergence in global accounting standards, highlighting the Exposure Draft ED/2013/6's goal of enhancing transparency in financial statements for various stakeholders.
2 Accounting for leases IAS 17: This chapter delves into the core principles of IAS 17, providing a framework for understanding lease accounting. It covers the scope of the standard and provides a crucial overview of how leases are classified, laying the foundation for subsequent discussions on finance and operating leases.
3 Finance leases: This section details the characteristics and implications of finance leases for both lessors and lessees. It likely explores the transfer of substantially all the risks and rewards incidental to ownership, the lessee's capitalization of the lease asset and recognition of a lease liability, and the lessor's recognition of lease receivables and derecognition of the asset. The analysis would differentiate the accounting treatment from an operating lease.
4 Operating leases: This chapter focuses on operating leases, explaining their characteristics and accounting treatment for both lessors and lessees. It discusses the lessor's recognition of lease income and the lessee's recognition of lease expenses, contrasting this with the capital lease treatment. The discussion likely covers the reasons why a lease would be classified as an operating lease rather than a finance lease, and potentially explores any complexities or nuances related to the classification criteria.
5 Sale-and-lease-back: This section analyzes the complexities of sale-and-lease-back transactions, examining the accounting implications for both the seller/lessor and the buyer/lessee. The discussion would cover the criteria for determining whether a sale has occurred and if the transaction should be treated as a sale or a financing arrangement. Special considerations regarding the recognition and measurement of assets and liabilities would also be central to this chapter.
6 Significant differences in contrast to HGB and US-GAAP: This chapter compares and contrasts the lease accounting treatments under IAS 17 with those under HGB (German Commercial Code) and US-GAAP. This comparative analysis will likely highlight the key differences in classification criteria, recognition methods, and disclosure requirements across the different accounting frameworks. It will likely help understand the implications of these variations for financial reporting and comparability.
Keywords
Lease accounting, IAS 17, finance lease, operating lease, lessor, lessee, sale-and-lease-back, HGB, US-GAAP, financial reporting, accounting standards, globalization, transparency.
Lease Accounting under IAS 17: A Comprehensive Overview - FAQ
What is the purpose of this document?
This document provides a comprehensive preview of a paper on lease accounting under International Accounting Standard 17 (IAS 17). It includes the table of contents, objectives and key themes, chapter summaries, and keywords. The information is intended for academic use and analysis of themes within the subject matter.
What topics are covered in this paper on lease accounting?
The paper covers the following key areas: the classification of leases (finance vs. operating), the roles and responsibilities of lessors and lessees in each type of lease, sale-and-lease-back transactions, a comparison of IAS 17 with other accounting standards (HGB and US-GAAP), and the overall significance of lease accounting within global and German economies.
How are leases classified under IAS 17?
IAS 17 classifies leases as either finance leases or operating leases. The paper details the criteria for each classification, which likely involves considerations such as the transfer of substantially all the risks and rewards incidental to ownership. The distinction heavily influences the accounting treatment for both lessors and lessees.
What is the role of the lessor and lessee in finance leases?
In a finance lease, the lessor recognizes lease receivables and derecognizes the asset, while the lessee capitalizes the lease asset and recognizes a lease liability. Essentially, the lessee assumes substantially all the risks and rewards associated with ownership.
What is the role of the lessor and lessee in operating leases?
In an operating lease, the lessor recognizes lease income, and the lessee recognizes lease expenses. The lessee does not capitalize the asset or recognize a liability. The accounting treatment is less complex than for finance leases.
What are sale-and-lease-back transactions, and how are they treated under IAS 17?
Sale-and-lease-back transactions involve selling an asset and simultaneously leasing it back. The paper examines the accounting implications for both the seller/lessor and the buyer/lessee, focusing on the criteria for determining whether a sale has genuinely occurred and the appropriate accounting treatment (sale vs. financing arrangement).
How does IAS 17 compare to other accounting standards (HGB and US-GAAP)?
The paper compares and contrasts the lease accounting treatments under IAS 17 with those under the German Commercial Code (HGB) and US Generally Accepted Accounting Principles (US-GAAP). This comparative analysis highlights key differences in classification criteria, recognition methods, and disclosure requirements across the different accounting frameworks.
What is the significance of lease accounting in the global and German economies?
The introduction emphasizes the significant role leasing plays in financing goods and services in both the global and German economies. Statistics on the substantial value of goods and services financed through leasing are likely cited.
What are the key takeaways from this paper preview?
The paper provides a comprehensive understanding of lease accounting under IAS 17, clarifying the classification of leases, the responsibilities of lessors and lessees, the complexities of sale-and-lease-back transactions, and the differences between IAS 17 and other major accounting standards. It emphasizes the importance of transparent financial reporting.
What are the keywords associated with this paper?
Key words include: Lease accounting, IAS 17, finance lease, operating lease, lessor, lessee, sale-and-lease-back, HGB, US-GAAP, financial reporting, accounting standards, globalization, and transparency.
- Arbeit zitieren
- Anonym (Autor:in), 2014, Accounting for leases. Analysis of the IAS 17 and its impact, München, GRIN Verlag, https://www.grin.com/document/304566
