Live Webinar

GAAP for Leases

Webinar Details $219

  • Webinar Date: March 20, 2024
  • Webinar Time: 2:00pm - 3:40pm EDT   live
  • Webinar Length: 100 Minutes
  • Guest Speaker:   Chuck Borek
  • Topic:   Taxation and Accounting
  • Credit:   CPE 2.0, ATATX 1.5, IRS 2.0
All Access Membership

The Financial Accounting Standards Board revolutionized accounting for leases with the issuance of Accounting Standards Update 2016-02. The new lease accounting rules will have a major impact on the financial statements of any organization that leases any type of property or equipment and may have a detrimental impact on contractual obligations, such as loan covenants. The new rules are now in effect for all entities. This course will familiarize you with the new rules and will help you navigate their complexity.

Learning Objectives:

  • What is a Right of Use Asset? 
  • Types of Arrangements that are Subject to the New Accounting Rules for Leases
  • The Four Steps necessary to Calculate the Right of Use Asset
  • Determining the Lease Term
  • Identifying the Various Types of Lease Payments
  • Choosing a Suitable Discount Rate
  • Additional Elements Incorporated into the ROU Asset
  • The 12-Month Policy Election
  • Accounting for Operating Leases Under the New Standard
  • Accounting for Finance Leases Under the New Standard

Level: Basic
Format: Live webcast
Instructional Method: Group: Internet-based
NASBA Field of Study: Accounting
Program Prerequisites: None
Advance Preparation: None

  1. Introduction
  2. Definition of a Lease 00:03:21
  3. Identified Asset 00:04:42
  4. New Lease Accounting 00:05:57
  5. Lease Accounting Effective Date 00:07:50
  6. Nature of Property 00:08:22
  7. Lease Defined 00:13:30
  8. Right to Control 00:13:48
  9. Embedded Leases 00:15:07
  10. Calculating ROU Asset 00:19:27
  11. Determining Lease Term 00:21:37
  12. Renewal Options 00:25:59
  13. Identifying Lease Payments 00:27:57
  14. Lease Payment Issues 00:32:02
  15. Segregating Lease Components 00:35:01
  16. Example: Contract Components 00:35:30
  17. Solution 00:36:31
  18. Determining Discount Rate 00:38:05
  19. Example 00:41:57
  20. Solution: Step 1 Determine the Lease Term 00:43:42
  21. Solution: Step 2 Identify Lease Payments 00:44:31
  22. Solution: Step 3 Determine the Discount Rate 00:45:01
  23. Solution: Step 4 Identify ROU Asset Elements 00:45:22
  24. Calculation of Lease Liability 00:48:02
  25. Calculation of ROU Asset 00:50:38
  26. 12-Month Policy 00:52:16
  27. Finance vs. Operating Leases 00:56:19
  28. Financing Lease Criteria 00:59:50
  29. General Considerations 01:05:50
  30. Lessee Accounting: Operating Leases 01:07:39
  31. Operating Lease Example 01:09:03
  32. Operating Lease Example: Year 1 01:10:35
  33. Operating Lease Example: Year 1 Cont’d 01:12:16
  34. Operating Lease Example: Year 1 Cont’d 01:13:41
  35. Operating Lease Example: Year 1 Cont’d 01:15:13
  36. Operating Lease Example: Year 1 Cont’d 01:16:24
  37. Operating Lease Example: Year 2 01:19:55
  38. Operating Lease Example: Year 3 01:21:13
  39. Lessee Accounting: Finance Leases 01:23:34
  40. Lessee Accounting: Finance Leases Cont’d 01:23:53
  41. Finance Lease Example 01:29:24
  42. Finance Lease Example Cont’d 01:29:55
  43. Finance Lease Example: Year 1 01:30:38
  44. Finance Lease Example: Year 1 Cont’d 01:31:30
  45. Finance Lease Example: Year 2 01:35:40
  46. Lessor Accounting: Minimal Changes 01:38:59
  47. Thank you! 01:41:29
  48. Presentation Closing 01:441:39
  • Accreted Interest 01:08:46, 01:13:41, 01:20:19
  • Allocation 00:33:45
  • Amortization 00:59:07, 01:15:34, 01:31:29
  • Asset 00:04:46, 00:05:44, 00:07:24, 00:13:52, 00:44:43, 01:00:07, 01:05:15, 01:10:37
  • Balance Sheet (BS) 00:06:14, 00:07:26, 00:50:19, 00:57:00, 01:03:00
  • Cash Flow Statement 01:26:24
  • Contract 00:05:34, 00:15:11, 00:17:57, 00:37:16
  • Direct Costs 00:41:57
  • Expense 01:04:46, 01:15:41
  • Fair Market Value (FMV) 00:38:11, 00:38:34, 01:03:56, 01:29:32
  • FASB - Financial Accounting Standards Board 00:08:13, 01:02:00
  • Finance Lease 00:56:59, 00:59:53, 01:23:40, 01:30:34
  • Generally Accepted Accounting Principles (GAAP) 00:00:56, 01:01:53
  • Implicit Rate 00:38:24, 00:43:45, 00:45:08
  • Lease Liability 00:06:07, 00:20:10, 01:13:33, 01:14:00, 01:20:25, 01:31:00
  • Lessee 00:04:02, 00:14:19, 00:26:17, 00:35:19, 01:39:03
  • Lessor 00:04:10, 00:05:09, 00:35:10, 00:38:25, 00:42:33, 01:29:42, 01:39:04
  • Liability 00:06:27, 01:10:38
  • Operating Lease 00:56:58, 01:07:42, 01:30:36
  • Personal Property 01:06:26
  • Present Value (PV) 00:48:51, 00:58:59, 01:10:40, 01:26:46
  • Real Property 01:05:52
  • Return on investment (ROI) 00:44:27
  • Right-of-Use Asset (ROU Asset) 00:06:05, 00:07:42, 00:19:14, 00:33:51, 00:45:28, 00:50:20, 01:10:54, 01:15:17, 01:30:54
  • Straight Line Amortization 00:59:02, 01:07:55, 01:20:12
  • Transaction 01:01:57

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.

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.

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).

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.

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

Return on investment (ROI): A measure used to evaluate the financial performance relative to the amount of money that was invested. The ROI is calculated by dividing the net profit by the cost of the investment. The result is often expressed as a percentage. See an example here.

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.

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.

Transaction: In QuickBooks, a transaction type identifies what kind of transaction occurred, such as a customer transaction, bill payment or a bank transfer. When you submit a transaction, you type in a transaction code to represent it.


Guest Speaker

  • Chuck Borek