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lovethepirk
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| Posted: 11 Nov 2009 at 19:10 | IP Logged
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p. 438 "sales leasebacks"
11 lines from the bottom of the page
"If the lease is classified as a capital lease, the deferred gain is amortized over the life of the asset at the same rate as the asset being depriciated."
Now next page opposite statement is made...WHAT!!!
p.439
"If the leaseback is classified as a capital lease, recognize gain is the amount of gain that exceeds the recorded amount of the asset"
Could someone help me with this. The 2nd statement basically is saying if you have a sale and subtract the carrying value you have to recognize that NOW. The 1st statement is saying amortize it.
I'm hella confused.
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lkbcpa2b
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| Posted: 11 Nov 2009 at 19:28 | IP Logged
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The difference depends on whether the seller-lessee retains substantiall all the rights to use the property (1) or more than minor but less than substantially all (2).
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lovethepirk
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| Posted: 11 Nov 2009 at 20:42 | IP Logged
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Those were my thoughts but when they explain the >10% <90% leaseback in Wiley they do this:
Cash
Asset
Deferred gain(PV of rental PMTS)
Gain
Are they saying in the book that that is how you account for a 10%/90% operating lease back and that for a 10%/90% capital you would.....
"p.439
"If the leaseback is classified as a capital lease, recognize gain is the amount of gain that exceeds the recorded amount of the asset"
***this statement to me translates into the following accounting***
Cash
Asset
Gain(recognize all gains NOW)
b/c that goes against all that they teach us to do with capital assets.
I just don't know why they put the "2)" bullet point up in Wiley on page. 439. It just don't make sense.
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Topic: Wiley Lease confusion while reviewing
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