Table
of Contents
Course
Learning Objectives. 4
Part
I. The Fundamentals of the Lease Accounting - Section 1. 1
Rising
to the Challenge. 1
The
Reason for the New Guidance. 1
The
Significant Improvements for Lease Accounting. 1
Key
Changes of the Lease Requirements. 3
Applicability. 7
Section
1 Review Questions. 9
Part
I. The Fundamentals of the Lease Accounting - Section 2. 10
Transition
Guidance. 10
Effective
Dates. 10
Practical
Expedients. 10
Leases
Acquired in a Business Combinations. 11
Transition
Requirements. 12
General
Rules. 12
Lessee
Transition. 12
Operating
Leases. 13
For
Former Operating Leases Classified as Operating Leases. 13
For
Former Operating Leases Classified as Finance Leases. 14
Capital
Leases. 15
For
Former Capital Leases Classified as Finance Leases. 15
For
Former Capital Leases Classified as Operating Leases. 15
Build-to-Suit
Lease Arrangements. 16
Lessor
Transition. 17
Operating
Leases. 17
Finance
Leases. 17
Leveraged
Leases. 17
Sale
and Leaseback. 18
Retrospective
Reporting Compliance. 18
Section
2 Review Questions. 20
Part
I. The Fundamentals of the Lease Accounting - Section 3. 21
The
Core Principles of Lease Accounting. 21
Key
Concepts. 21
Definition
of a Lease. 22
Lease
Classification. 22
Lessee
Accounting. 24
Lessor
Accounting. 25
U.S.
GAAP vs. IFRS. 26
Section
3 Review Questions. 29
Part
II. The Impact of the New Lease Standard - Section 4. 30
Required Organizational Changes. 30
Overall Challenges. 30
Strategies. 31
Exhibit
A: Walgreens Boots Alliance 2016 Annual Report. 33
Implementation
Strategies. 34
Enhancing
Lease Administration Systems. 34
Improving
the Business Processes. 36
Implementing
Proper Controls. 38
Increased
Estimates and Judgments. 40
The
Risk of Material Misstatement 40
Enhancing the Quality of Accounting Estimates. 41
Implications to Debt Covenants and Financial
Statements. 42
Debt
Covenants. 42
Financial
Metrics. 43
Implications
to Real Estate Industry. 46
Overview.. 46
Lessee
(Tenants) Accounting. 46
Lessor
(Landlords) Accounting. 46
Other
Considerations. 47
SEC
Registrants Reporting Responsibilities. 48
Sarbanes-Oxley
Act Assessment 48
SOX Section 404. 48
SOX Section 302. 49
General
Disclosure Rules. 49
Exhibit
B: FedEx 2017 Annual Report. 50
Annual
Disclosures in First Quarterly Filing. 50
Financial
Data Disclosure Requirements. 51
Section 4 Review Question. 52
Part
III: The Application of the Lease Standard - Section 5. 53
General
Rules. 53
Identification
of a Lease. 53
Identified
Asset. 55
Substantive
Substitution Rights. 55
Portions
of Assets. 55
Right
to Control the Use of the Identified Asset. 56
Right
to Obtain the Economic Benefits from the Use of the Identified Asset 56
Right
to Direct the Use of the Identified Asset 56
Separation
of Lease and Nonlease Components. 58
Contract
Combinations. 61
Lease
Commencement Date. 62
Initial
Recognition and Measurement 62
Lease
Term and Purchase Options. 62
Lease
Payments. 64
Initial
Direct Costs. 66
Discount
Rate for the Lease. 67
Subsequent
Measurement 69
Lease
Modifications. 70
Disclosures. 71
Section
5 Review Questions. 74
Part
III: The Application of the Lease Standard - Section 6. 75
Lessee
Model 75
Measurement
of the Consideration in the Contract 75
Determining
the Consideration. 75
Allocating
the Consideration. 76
Lease
Classification. 77
Initial
Recognition and Measurement 79
Short-Term
Leases. 79
Finance
Leases. 80
Operating
Leases. 81
Subsequent
Measurement 82
Remeasurement
of the Lease Liability. 82
Finance
Lease. 83
Operating
Lease. 83
Leasehold
Improvements. 85
Subleases. 85
Lease
Termination. 86
Lease
Modifications. 86
Presentation. 89
Balance
Sheet. 89
Income
Statement. 89
Statement
of Cash Flows. 89
Disclosures. 90
Qualitative
Disclosure. 90
Quantitative
Disclosure. 91
Section
6 Review Questions. 93
Part
III: The Application of the Lease Standard - Section 7. 94
Lessor
Model 94
Measurement
of the Consideration in the Contract 94
Determining
the Consideration. 94
Allocating
the Consideration. 96
Lease
Classification. 97
Initial
Recognition and Measurement 99
Sales-Type
Leases. 100
Direct
Financing Leases. 102
Operating
Leases. 103
Subsequent
Measurement 104
Sales-Type
and Direct Financing Leases. 104
Impairment
of the Net Investment in the Lease. 104
Sale
of the Lease Receivable. 104
Underlying
Asset 104
Lease
Termination. 105
Operating
Leases. 105
Subleases. 105
Lease
Modifications. 105
Presentation. 110
Sales-Type
and Direct Financing Leases. 111
Balance
Sheet 111
Income
Statement 111
Statement
of Cash Flows. 111
Operating
Leases. 112
Disclosures. 112
Qualitative
Disclosure. 112
Additional
Disclosure. 113
Sales-Type
and Direct Financing Leases. 113
Operating
Leases. 113
Section
7 Review Questions. 115
Part
III: The Application of the Lease Standard - Section 8. 116
Sale
and Leaseback Transactions. 116
General
Rules. 116
Attributes
of a Contract. 116
Indicators
that Control of the Asset Has Transferred. 117
Lessee
Involvement in the Construction or Design of the Underlying Asset 118
Recognition. 119
Initial
Measurement 120
Section
8 Review Questions. 123
Solutions
to Review Questions. 124
Section
1 Review Questions Feedback. 124
Section
2 Review Questions Feedback. 126
Section
3 Review Questions Feedback. 128
Section 4 Review Question Feedback. 131
Section
5 Review Questions Feedback. 133
Section
6 Review Questions Feedback. 136
Section
7 Review Questions Feedback. 138
Section
8 Review Questions Feedback. 140
Glossary. 141
Index. 145
CPE
Exam Answer Sheet 146
Final
Examination. 148
CPASelfstudy.com
Course Evaluation. 155