Table of Contents

Chapter 1 - Accounting for the New Lease Standard - ASU 2016-02 - Section 1.................................. 9

I. Background................................................................................................................................. 9

II. Basic Concepts of ASU 2016-02............................................................................................. 12

A. General Rules........................................................................................................................ 12

Chapter 1 - Section 1 Review Questions................................................................................................ 19

Chapter 1 - Accounting for the New Lease Standard - ASU 2016-02 - Section 2................................ 20

III. Introduction............................................................................................................................... 20

IV. Definitions used in ASU 2016-02............................................................................................. 20

V. Scope and Scope Exceptions.................................................................................................... 23

VI. Identifying a Lease.................................................................................................................... 23

Chapter 1 - Section 2 Review Questions................................................................................................ 52

Chapter 1 - Accounting for the New Lease Standard - ASU 2016-02 - Section 3................................ 54

VII. Lessee Rules.............................................................................................................................. 54

A. Lease Classification - Lessee................................................................................................ 54

B. Initial Measurement of Lease- Lessee.................................................................................. 65

C. Lease Modifications - Lessee............................................................................................... 73

D. Lease Payments - Lessee...................................................................................................... 78

E. Lease Term and Purchase Options- Lessee.......................................................................... 86

F. Subsequent Reassessment of Lease Elements- Lessee......................................................... 90

G. Short-Term Leases - Lessee................................................................................................. 94

H. Subsequent Measurement and Accounting for Leases- Lessee........................................... 97

I. Other Recognition and Measurement Issues- Lessees........................................................... 103

J. Financial Statement Presentation Matters- Lessee................................................................. 108

K. Disclosures by Lessees....................................................................................................... 110

Chapter 1 - Section 3 Review Questions.............................................................................................. 134

Chapter 1 - Accounting for the New Lease Standard - ASU 2016-02 - Section 4.............................. 136

VIII. Lessor Rules............................................................................................................................. 136

A. Lease Classification............................................................................................................ 136

B. Accounting for Sales-Type Lease- Lessor.......................................................................... 143

C. Accounting for a Direct Financing Lease........................................................................... 150

D. Accounting for Operating Leases- Lessor.......................................................................... 154

E. Disclosure- Lessor Leases................................................................................................... 161

Chapter 1 - Section 4 Review Questions.............................................................................................. 164

Chapter 1 - Accounting for the New Lease Standard - ASU 2016-02 - Section 5.............................. 166

IX. Transition and Effective Date Information............................................................................. 166

A. General- Existing Leases..................................................................................................... 166

B. Transition............................................................................................................................ 166

X. Leases: Sale and Leaseback Transactions................................................................................ 175

XI. Leases: Leveraged Lease Arrangements.................................................................................. 178

Chapter 1 - Section 5 Review Questions.............................................................................................. 179

Chapter 1 - Accounting for the New Lease Standard - ASU 2016-02 - Section 6.............................. 180

XII. Impact of Changes to Lease Accounting................................................................................ 180

XIII. Impact of Lease Changes on Nonpublic Entities.................................................................... 188

XIV. Other Considerations- Dealing with Financial Covenants...................................................... 190

XV. Avoiding the New Lease Standard......................................................................................... 192

Chapter 1 - Section 6 Review Questions.............................................................................................. 201

Suggested Solutions.............................................................................................................................. 203

Glossary............................................................................................................................................. 223

Final Examination................................................................................................................................. 228

CPASelfstudy.com Course Evaluation................................................................................................. 236