Lease Accounting Essay

4960 WordsJan 16, 200920 Pages
Accounting Policy & Procedures for LEASES 9 July 2008 Table of Contents A. Purpose……………………………………………………………………………..2 B. Definition of a Lease……………………………………………………………….2 C. Classification of Leases……………………………………………………………2 D. Accounting for Leases……………………………………………………………..4 E. Disclosure Requirements in the Financial Statements of a Lessee……………...5 F. Appendixes………………………………………………………………………….6 Appendix I Definition of terms used in IPSAS 13………………...6 Appendix II Flowchart – Classification of a Lease………………...8 Appendix III Accounting Treatment of a Finance Lease…………..9 Appendix IIIa Lease Determination & Calculation Worksheet…....12 Appendix IV Accounting Treatment of an Operating Lease……...13 Appendix V Model Disclosures………………………………….....13 Appendix VI Agency’s Equipment Leased or Rented in 2007…….15 Appendix VII IPSAS 13 vs. IPSAS 23………………………………..15 A. PURPOSE 1. The purpose of this paper is to provide the general framework for determining whether the lease arrangements entered by the Agency constitute finance or operating leases. In addition, the paper contains the accounting treatment for both types of leases and the disclosure requirements in the Statements of Financial Performance and Financial Position. 2. Currently, the Agency is only a party to operating leases and not to any finance leases. In addition, it is expected that the Agency will be leasing assets (lessee) in order to use them to provide goods and services rather than earning revenue from leasing out assets (lessor). Therefore, the accounting procedures and disclosure requirements contained in this paper reflect those of a lessee only. B. DEFINITION OF A LEASE 3. A lease is an agreement whereby the lessor conveys to the lessee in return for

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