Effect of Finance Leases and Operating Leases on Financial Statements
Introduction In substance, a finance (or capital) lease is equivalent to the purchase of an asset by a buyer (or lessee) that is directly financed by the seller (or lessor). An operating lease is an agreement providing the lessee with…
Effects of Assets Leases on Financial Statements and Ratios
[vsw id=”gamwZA2l48g” source=”youtube” width=”611″ height=”344″ autoplay=”no”] Introduction A lease is a contract between a lessor or owner of an asset, and a lessee, who is seeking to use the asset. In exchange for the right to the use of the…
Financial Reporting of Investment Property
IFRS defines investment property as property that is owned (or, in some cases, leased under a finance lease) to earn rentals or capital appreciation, or both. Cost Model and Fair Value Model IFRS allows companies to value investment properties either…
Property, Plant, Equipment, and Intangible Assets
Analysts can use disclosures to better their understanding of a company’s investments in tangible and intangible assets. To begin with, disclosures can enable analysts to tell how a company’s investments changed during a reporting period. In addition, disclosures reveal how…
Derecognition of Property, Plant, Equipment and Intangible Assets
Derecognition of an asset occurs whenever it is disposed of or it is not expected to generate any future benefits either from its use or disposal. As a result, the asset is removed from the financial statements. Disposal of a…
Describe the Revaluation Model
The revaluation model is an alternative to the cost model. It is used for the periodic valuation and reporting of long-lived assets. Whereas IFRS permits the use of either the revaluation model or the cost model, US GAAP doesn’t allow…
Choice of Amortization Method and Assumptions
The amortization expense, financial statements, and the ratios derived from them may be significantly impacted by a company’s selected amortization method and the accompanying assumptions and estimates. The Effect of the Choice of Amortization Method and Assumptions on Amortisation Expense,…
Choice of Depreciation Method and Assumptions
Financial statements and the ratios derived from them may be significantly impacted by a company’s selected depreciation method and accompanying assumptions and estimates. Companies should review the estimates used periodically to ensure that they remain reasonable. Master depreciation methods and…
Different Depreciation Methods for Property, Plant, and Equipment
Depreciation refers to the process of allocating the cost of a tangible asset over its useful life. Based on the cost model of reporting long-lived assets, the capitalized costs of long-lived tangible assets, other than land, are allocated to subsequent…
Calculate and Interpret Segment Ratios
To gain a detailed understanding of a company, it is necessary to evaluate the performance of its individual business segments, i.e., its subsidiaries, operating units, and operations in different geographical areas. This evaluation is facilitated by the fact that both…
