GAAP for Leases

1. Introduction
2. Definition of a Lease 00:04:22
3. Identified Asset 00:06:46
4. New Lease Accounting 00:08:40
5. Lease Accounting Effective Date 00:09:38
6. Nature of Property 00:10:50
7. Lease Defined 00:16:36
8. Right to Control 00:17:21
9. Embedded Leases 00:19:43
10. Calculating ROU Asset 00:23:34
11. Determining Lease Term 00:26:25
12. Renewal Options 00:31:03
13. Identifying Lease Payments 00:33:15
14. Lease Payment Issues 00:42:48
15. Segregating Lease Components 00:42:47
16. Example: Contract Components 00:43:25
17. Solution 00:45:24
18. Determining Discount Rate 00:48:20
19. Example 00:50:04
20. Solution: Step 1 Determine the Lease Term 00:51:50
21. Solution: Step 2 Identify Lease Payments 00:52:51
22. Solution: Step 3 Determine the Discount Rate 00:53:15
23. Solution: Step 4 Identify ROU Asset Elements 00:53:45
24. Calculation of Lease Liability 00:56:35
25. Calculation of ROU Asset 00:58:23
26. 12-Month Policy 00:59:16
27. Finance vs. Operating Leases 01:03:09
28. Financing Lease Criteria 01:05:32
29. General Considerations 01:10:21
30. Lessee Accounting: Operating Leases 01:13:04
31. Lessee Accounting: Operating Leases 01:13:39
32. Operating Lease Example 01:14:19
33. Operating Lease Example: Year 1 01:15:57
34. Operating Lease Example: Year 1 - Lease Expense 01:17:02
35. Operating Lease Example: Year 1 - Accreted Interest 01:19:23
36. Operating Lease Example: Year 1 - Right-of-Use Asset 01:19:53
37. Operating Lease Example: Year 1 - Lease Liability 01:20:44
38. Operating Lease Example: Year 2 01:24
39. Operating Lease Example: Year 3 01:25:37
40. Lessee Accounting: Finance Leases 01:27:33
41. Lessee Accounting: Finance Leases Cont’d 01:28:00
42. Finance Lease Example 01:29:19
43. Finance Lease Example Cont’d 01:30:25
44. Finance Lease Example: Year 1 01:30:59
45. Finance Lease Example: Year 1 Cont’d 01:32:35
46. Finance Lease Example: Year 2 01:37:01
47. Lessor Accounting: Minimal Changes 01:39:39
48. Thank you! 01:40:39
49. Presentation Closing 01:40:51

• Accreted Interest 01:18:12
• Amortization 01:05:20, 01:13:48, 01:18:15, 01:32:59
• Asset 00:04:41, 00:06:50, 00:17:30, 00:19:24, 00:29:54, 00:33:04, 00:43:10, 01:03:53, 01:06:32, 01:12:10, 01:16:06, 01:32:05
• Balance Sheet (BS) 01:05:01
• Capitalize 01:05:38
• Contract 00:16:43, 00:21:19
• Direct Cost 00:51:27, 00:58:31
• Expense 00:11:40, 01:13:51, 01:27:51, 01:35:46
• Fair Market Value (FMV) 00:49:01, 01:06:10, 01:30:38
• FASB - Financial Accounting Standards Board 00:01:58
• Finance Lease 01:03:26, 01:04:39, 01:06:06, 01:27:40
• Financial Statement 00:25:36
• Generally Accepted Accounting Principles (GAAP) 00:00:06, 00:02:11, 00:04:24, 00:07:42, 01:02:35, 01:30:06
• Implicit Rate 00:53:20
• Leasehold Interest 00:26:25
• Lease Liability 00:08:54, 00:57:48, 01:18:13, 01:21:04, 01:31:24
• Lessee 00:06:44, 00:09:00, 00:15:56, 00:18:59, 00:53:29, 01:01:12, 01:13:15
• Lessor 00:11:24, 00:43:02, 00:48:42
• Liability 01:16:08
• Operating Lease 01:03:26, 01:04:47, 01:10:23, 01:13:26, 01:27:37
• Personal Property 01:10:21
• Present Value (PV) 00:25:32, 00:48:29, 00:57:09, 01:16:13, 01:30:34
• Real Property 01:10:23
• Right-of-Use Asset (ROU Asset) 00:08:52, 00:20:00, 00:23:46, 00:45:23, 00:57:57, 01:04:59, 01:16:31, 01:18:15, 01:19:56, 01:31:07
• Straight Line Amortization 01:00:49, 01:13:50, 01:17:52, 01:37:07
• Supplier 00:18:54

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.

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.

Capitalize: To capitalize is to record a cost/expense on the balance sheet for the purposes of delaying full recognition of the expense. In general, capitalizing expenses is beneficial as companies acquiring new assets with long-term lifespans can amortize the costs. (www.investopedia.com)

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

Direct Costs: Direct costs are expenses that directly go into producing goods or providing services, while indirect costs are general business expenses that keep you operating. Examples of direct costs are direct labor, direct materials, commissions, piece-rate wages, and manufacturing supplies.

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.

Financial Statement: Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. ... A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time.

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.

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.

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.