GAAP for Leases

1. Introduction
2. Definition of a Lease 00:02:31
3. Identified Asset 00:04:06
4. New Lease Accounting 00:06:19
5. Nature of Property 00:08:25
6. Lease Defined 00:11:26
7. Right to Control 00:12:04
8. Embedded Leases 00:14:08
9. Calculating ROU Asset 00:16:09
10. Determining Lease Term 00:18:45
11. Renewal Options 00:24:38
12. Identifying Lease Payments 00:26:15
13. Lease Payment Issues 00:30:06
14. Segregating Lease Components 00:31:59
15. Example: Contract Components 00:33:46
16. Solution 00:34:49
17. Determining Discount Rate 00:36:13
18. Example 00:39:09
19. Solution: Step 1 Determine the Lease Term 00:40:37
20. Solution: Step 2 Identify Lease Payments 00:42:02
21. Solution: Step 3 Determine the Discount Rate 00:43:13
22. Solution: Step 4 Identify ROU Asset Elements 00:44:00
23. Calculation of Lease Liability 00:45:45
24. Calculation of ROU Asset 00:47:43
25. 12-Month Policy 00:48:57
26. Finance vs. Operating Leases 00:50:38
27. Financing Lease Criteria 00:53:54
28. General Considerations 00:57:24
29. Lessee Accounting: Operating Leases 00:59:56
30. Lessee Accounting: Operating Leases 01:00:20
31. Operating Lease Example 01:02:19
32. Operating Lease Example: Year 1 01:04:11
33. Operating Lease Example: Year 1 Cont’d 01:05:34
34. Operating Lease Example: Year 1 Cont’d 01:06:59
35. Operating Lease Example: Year 1 Cont’d 01:08:26
36. Operating Lease Example: Year 1 Cont’d 01:09:00
37. Operating Lease Example: Year 2 01:12:33
38. Operating Lease Example: Year 3 01:15:04
39. Lessee Accounting: Finance Leases 01:18:00
40. Lessee Accounting: Finance Leases Cont’d 01:19:47
41. Finance Lease Example 01:24:31
42. Finance Lease Example Cont’d 01:26:04
43. Finance Lease Example: Year 1 01:37:09
44. Finance Lease Example: Year 1 Cont’d 01:37:22
45. Finance Lease Example: Year 2 01:38:48
46. Lessor Accounting: Minimal Changes 01:41:14
47. Thank you! 01:42:32
48. Presentation Closing 01:43:23

• Accreted Interest 01:01:09, 01:06:51, 01:07:26, 01:39:38
• Allocation 00:30:32
• Amortization 00:50:47, 01:06:55, 01:37:33
• Asset 00:03:00, 00:06:43, 00:11:37, 00:12:14, 00:35:44, 00:37:03, 00:48:21, 00:51:34, 00:54:14, 01:04:16, 01:27:11
• Balance Sheet (BS) 00:07:34, 00:10:44, 00:15:50, 01:01:18, 01:12:26, 01:22:35
• Cash Flow Statement 01:22:11, 01:23:14
• Contract 00:07:16, 00:10:03, 00:11:27, 00:30:49
• Cost 00:17:02, 00:52:57
• Expense 00:30:17, 00:52:48, 01:00:25, 01:12:41, 001:21:06, 01:38:13
• Fair Market Value (FMV) 00:25:35, 00:29:03, 00:37:14, 01:03:55, 01:12:48, 01:27:00
• FASB - Financial Accounting Standards Board 00:55:16
• FASB - Financial Accounting Standards Board 00:55:17
• Finance Lease 00:50:34, 00:56:02, 01:15:00, 01:18:05, 01:19:50
• Generally Accepted Accounting Principles (GAAP) 00:01:04, 00:02:34, 00:04:34, 00:06:52, 00:35:55, 00:55:15, 01:23:04
• Implicit Rate 00:36:29, 00:43:20, 01:03:15, 01:25:13
• Income Statement  01:22:40
• Indirect Cost 00:47:51
• Leasehold Interest 00:10:18, 00:21:49
• Lease Liability 00:07:03, 00:45:28, 01:01:16, 01:04:26, 01:07:12, 01:37:20
• Lessee 00:02:58, 00:03:56, 00:07:54, 00:13:06, 00:38:13, 00:59:56, 01:04:06, 01:41:31
• Lessor 00:04:10, 00:28:00, 00:34:26, 00:37:26, 00:43:19, 01:00:08, 01:08:53, 01:25:13, 01:41:21
• Liability 00:06:43, 01:04:16,m 01:39:13
• Operating Lease 00:50:36, 00:52:38, 00:57:28, 00:59:58, 01:02:26, 01:06:43
• Personal Property 01:18:16
• Present Value (PV) 00:36:22, 00:37:11, 00:44:22, 00:46:31, 01:01:25, 01:04:35
• Real Property 00:57:26, 00:58:08, 01:18:21
• Right-of-Use Asset (ROU Asset) 00:06:46, 00:14:23, 00:16:02, 00:30:24, 00:36:01, 00:41:59, 00:47:38, 01:01:05, 01:04:24, 01:21:24, 01:41:36
• Straight Line Amortization 01:00:38, 01:25:02
• Supplier 00:13:08
• Tangible Property 01:18:36

Accreted Interest : Accreted Interest means interest accrued on a Loan Asset that is added to the principal amount of such Loan Asset instead of being paid as interest as it accrues.

Allocation: Allocation is the separation of profits by percentage for each member.

Amortization: An accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time. (investinganswers.com)

Asset: Property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies.

Balance Sheet (BS): A financial report that summarizes a company's assets (what it owns), liabilities (what it owes) and owner or shareholder equity at a given time.

Cash Flow Statement: In financial accounting, a cash flow statement, also known as statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.

Contract: A written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be enforceable by law.

Cost: The sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location

Expense: Offset (an item of expenditure) as an expense against taxable income.

FASB - Financial Accounting Standards Board: The Financial Accounting Standards Board is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles within the United States in the public's interest.

Fair Market Value (FMV): The term fair market value is used throughout the Internal Revenue Code among other federal statutory laws in the USA including Bankruptcy, many state laws, and several regulatory bodies. In litigation in many jurisdictions in the United States, the fair market value is determined at a hearing.

Finance Lease: A financial lease is generally treated like loan. Here, asset ownership is considered by the lessee, so the asset appears on the balance sheet.

Generally Accepted Accounting Principles (GAAP): A set of rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. Following these rules is especially critical for all publicly traded companies.

Implicit Rate: The rate implicit in the lease is the interest rate set by the lessor in the lease agreement. This is the rate at which the present value of the lease payments and the unguaranteed residual value equals the sum of the fair value of the underlying asset and any initial direct costs of the lessor. To calculate the implicit rate, find the percentage that, when applied to the sum of the minimum lease payments, causes the present value of all the payments to equal the current fair market price of the rental property. On a computer spreadsheet, type =RATE(in a cell).

Income Statement: One of the three primary financial statements used to assess a company's performance and financial position (the two others being the balance sheet and the cash flow statement). The income statement summarizes the revenues and expenses generated by the company over the entire reporting period. (investinganswers.com)

Indirect Costs: Indirect costs are costs that are not directly accountable to a cost object. Indirect costs may be either fixed or variable. Indirect costs include administration, personnel, and security costs. These are those costs that are not directly related to production. Some indirect costs may be overhead. Examples of indirect costs are production supervision salaries, quality control costs, insurance, and depreciation.

Lease Liability: In accounting, a lease liability is a financial obligation to make the payments arising from a lease, measured on a discounted basis. Lease liability is calculated using the present value of the lease payments over the lease term discounted, typically, using the lessee's incremental borrowing rate.

Leasehold Interest: A leasehold interest is a contract in which an individual or entity, or in real estate terms, a lessee, leases a parcel of land from an owner or lessor for a set period of time. The lessee has the exclusive rights to possess and use as an asset or property for the specified period of time.

Lessee: In a lease agreement, the lessee is defined as the party that pays for the use of the asset or property.

Lessor: One that transfers property (such as a house or a car) by a contract. The lessor is the party that receives payments from the lessee in exchange for the usage of its asset or property.

Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

Operating Lease: An operating lease is generally treated like renting. That means the lease payments are treated as operating expenses and the asset does not show on the balance sheet.

Personal Property: Personal property is something that you could pick up or move around. This includes such things as automobiles, trucks, money, stocks, bonds, furniture, clothing, bank accounts, money market funds, certificates of deposit, jewels, art, antiques, pensions, insurance, books, etc.

Present Value (PV): The current value of a future sum of money based on a specific rate of return. Present value helps us understand how receiving $100 now is worth more than receiving $100 a year from now, as money in hand now has the ability to be invested at a higher rate of return. See an example of the time value of money here.

Real Property: Real property is land and any property attached directly to it, including any subset of land that has been improved through legal human actions. Examples of real properties can include buildings, ponds, canals, roads, and machinery, among other things

Right-of-Use Asset (ROU Asset): In accounting, the right-of-use asset (ROU asset) arises from a lease agreement and represents the lessee's license to hold, operate, or occupy the leased property or item over the lease term. The asset is calculated as the initial amount of the lease liability, plus any lease payments made to the lessor before the lease commencement date, plus any initial direct costs incurred, minus any lease incentives received.

Straight Line Amortization: Straight-line amortization is a way of calculating debt repayment where a company allocates the same amount of interest for each payment until it repays the debt in full.

Supplier: A supplier is an entity that supplies goods and services to another organization. A supplier is usually a manufacturer or a distributor. A distributor buys goods from multiple manufacturers and sells them to its customers. Similar Terms. A supplier is also known as a vendor.

Tangible Property: Tangible property in law is, literally, anything which can be touched, and includes both real property and personal property (or moveable property), and stands in distinction to intangible property.

Total Cost: Total cost is the total expenditure incurred to produce some type of output. From an accounting perspective, the total cost concept is more applicable to financial reporting, where overhead costs must be assigned to certain assets.