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Land Leased Accounting

Accounting of leases - as 19 By this you can ace your accounting practices and can reach mile stone you have not even thought of you will reach in your damn life

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Raghu Singh
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24 views1 page

Land Leased Accounting

Accounting of leases - as 19 By this you can ace your accounting practices and can reach mile stone you have not even thought of you will reach in your damn life

Uploaded by

Raghu Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Lease Accounting – Appendix B, Leases Involving Land and Buildings

START

Calculate fair value


Lease meets of land relative to Relative value of
NO NO
criteria 1 or 2? the total leased land > 25%?
property’s fair value.

YES

Treat land and


building as separate
Treat land and
units. Account for
building as one
land as an operating
single unit.
lease; continue
analysis for building.

YES

Does building unit Combined unit meets


NO
meet criteria 3 or 4? NO criteria 3 or 4?

YES YES

Separate land and building components and


capitalize individually (but do not amortize land). Treat building unit as Treat building unit and
Treat combined unit as Treat combined unit as
Determine the value of each component by pro- capital lease and land as land as separate
capital lease operating lease
rating the lease payments by each component’s operating lease operating leases
relative fair value.

Criteria Key
Criterion 1: Ownership of the asset transfers to the lessee by the end of the lease term.
Criterion 2: The lease contains a bargain purchase option (BPO). A bargain purchase option is a lease clause that allows the
lessee to obtain title to the leased facilities and/or equipment for less than its fair market value, for example, a nominal
amount such as $1.
Criterion 3: The lease term is equal to 75% or more of the estimated economic life of the leased asset at the beginning of
the lease term.
Criterion 4: The present value at the beginning of the lease term of the minimum lease payments equals or exceeds 90
percent of the fair value of the leased asset. This amount excludes the portion of the payments representing executory
costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon.

Lease Accounting Policy, Appendix B Page 1

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