Archive / 1.08 Finance Leases

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Owning a building versus renting

You’re in need of a office space and let’s presume you have two options – whether to buy a small place or rent another. They are equally suitable both in terms of interior and their place in the neighbourhood. Which one would you go for? On one hand you could buy a place, which in […]

Subsequent measurement and entries for finance lease on financial statements

After initial recognition you end up having an asset and a liability on your balance sheet. Now when it comes to subsequent measurement and entries, there are a couple of things relevant to it. First off is the depreciation. The asset is depreciated the same way as every other asset in the group it was […]

Initial recognition of finance lease

When you have worked out your contract and deemed it is more a finance rather an operating lease, you need consider it as your own asset. “Finance” essentially means that someone else financed the purchase of your asset. As a result, this ‘someone’ is leasing the asset out to you asking for a rental fee. […]

Finance lease – when can we talk about finance lease?

When operating lease is really straightforward and only comprises of one linear expense on the income statement, finance lease is a bit more complicated than that and also comprises of couple of other financial statement lines being affected. Before we can however start digging deeper into recognizing the finance lease on the balance sheet, we […]

Generally speaking of leases – finance and operating leases

You may encounter leases in all sorts of businesses. It can be to lease machinery for production, a car for everyday use or small office supplies like a coffee machine. As such when we talk about leases and leasing, we essentially mean gaining a right to use an asset. When you lease an asset, you […]

Interest on finance lease liabilities

Finance leases are in other words also called capital leases. Shortly of the meaning of finance lease – it’s an arrangement where the borrower chooses an asset, the finance company will purchase the asset and the borrower will use the selected asset during the period of lease. During this very same period the borrower pays […]

Simple interest calculation

Regardless of the fact that in Medieval Ages charging for interest was not well looked upon to say the least, in nowadays interest is something we all agree that makes sense. Moreover, it makes sense in the form that you are giving or you are given the ability to use someone else’s asset (whether its […]