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U.S. GAAP Codification of Accounting Standards |
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U.S. GAAP Accounting Standards |
| Codification Topic 840-30 Capital Leases Leases SFAS 13, November 1976 "Accounting for Leases" Lease classification criteria (A) Ownership transfer --> Ownership is transferred by the end of the lease term (B) Bargain purchase option -> Lessee has an option purchase at the price lower than the fair value (C) Lease term: 75% rule --> Lease term ≥ 75% of economic life of the leased property (D) Minimum lease payment: 90% rule --> Present value of minimum lease payments > 90% of fair value of the leased property Additional criteria for lessor (E) Collectibility of minimum lease payment --> reasonably predictable (F) No important uncertainties --> about the additional costs to be incurred by lessor --> when such costs are not reimbursable Capital lease by lessee 1. A lease meets any of (A), (B), (C), (D) 2. The leased property is recognized as an asset by lessee Capital lease by lessor A lease is classified as one of the following (1) sales-type lease (2) direct financing lease (3) leveraged lease Sales-type lease 1. A lease satisfies any of (A), (B), (C), (D) and both of (E), (F) 2. The lessor gets manufacturer's or dealer's profit or loss Direct financing lease 1. A lease satisfies any of (A), (B), (C), (D) and both of (E), (F) 2. The lessor does not get manufacturer's or dealer's profit 3. A lease does not meet the leveraged lease criteria Leveraged lease 1. A lease satisfies any of (A), (B), (C), (D) and both of (E), (F) 2. The lessor does not get manufacturer's or dealer's profit 3. A lease meets all of (G), (H), (I) Leveraged lease combines two transactions into one Transaction 1: lessor borrows money and purchases the leased property Transaction 2: lessor leases the property to lessee Manufacturer's or dealer's profit or loss --> when fair value ≠ carrying amount of the leased property --> profit when fair value > carrying amount --> loss when fair value < carrying amount Leveraged lease criteria (G) A lease involves at least three parties --> a lessee, a lessor (equity participant), a long-term creditor (H) Financing by long-term creditor --> provides substantial leverage to the lessor --> is nonrecourse as to the lessor's general credit (I) Lessor's net investment --> declines during early periods --> rises during later periods Capital lease accounting by lessee --> Recognize the leased property as an asset --> and recognize a liability for lease payment Accounting by lessor 1. Sales-type lease --> The lessor records the lease same as a sale of the property --> Sales, cost of goods sold, lease receivable, unearned income are recognized by the lessor 2. Direct financing lease --> Asses is derecognized from the lessor's records --> Lease receivable, unearned income are recognized by the lessor 3. Leveraged lease --> The lessor recognizes the following: (a) rentals receivable (b) unearned and deferred income (c) residual value of leased property (d) investment tax credit, if applicable |
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Codification Topic 840 Leases |
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Subtopics of Codification Topic 840 840-10 Overall 840-20 Operating leases 840-30 Capital leases 840-40 Sale-leaseback transactions |
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Accounting Terms of Codification Topic 840-10 Bargain purchase option Bargain renewal option Capital lease Contingent rentals Direct financing lease Estimated economic life Estimated residual value Fair value of leased property Fiscal funding clause Heat supply (or burn-up) contracts Incremental borrowing rate Indirectly related to the leased property Interest rate implicit in the lease Lease Lease inception Lease term Leveraged lease Minimum lease payments Noncancelable lease term Operating lease Penalty Probable Reasonably possible Remote Sales-type lease Significant influence Sublease Substantially all |
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Accounting Terms of Codification Topic 840-20 Construction period lease payments Original lessee |
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Accounting Terms of Codification Topic 840-30 Advance refunding Delayed equity investment Interest method Nonrecourse financing |
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Accounting Terms of Codification Topic 840-40 Active use of the property Minor Normal leaseback Profit or loss on sale Property improvements or integral equipment Sale-leaseback accounting Sale recognition Wrap lease transaction |
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