1. avatar says

    Hello Mike,

    Are there any exam tips for this September sitting please?

    And oh by the way, the is this a dagger I see before me is from Macbeth….. I loved that play… you “soliloquyed” it well…. and I love the way you teach.. thank you for the great work

  2. avatar says

    Hi sir,
    I have a confusion about the concept of taking lower of present value of minimum lease payments & fair value, because in notes it says that implicit interest rate causes the present value of lease payments & residual value to be equal to fair value of asset, so how can the present value of lease payments be higher than fair value of asset & if it is then wouldn’t it be understating the liability if we take the lower of i.e. fair value, in the obligations account, because the liability that exists at present is the present value of lease payments & the interest should be accruing on that amount instead of fair value.

  3. Profile photo of nkmile64 says

    Great lecture from a great tutor!
    Thank you sir and please spare some of your time to clarify the following points:

    (a) In the reconciliation of Min Lease Payments with PV section of the notes, you mentioned a GROSS and a NET presentation option. Are both of these required or just one of them?

    (b) In the GROSS presentation method you refer to “Finance Lease Interest not yet accrued”. Is this interest calculated for the remaining years of the lease term? What exactlly is that?

    • avatar says

      Bcz it misleads the users of financial statements,finance leases used to be off balance sheet:no asset recorded no liability recorded hence an increase in ROCE and lower gearing so IAS 17 was introduced

    • avatar says

      I believe it is because in the UK in particular we are followers of a principles based system – rather than a rules based one. In america you have a rules based system meaning that you can in someways legally mislead the users of financial statements as the way that you have presented an item in your accounts is not breaking the law but presents your company in a more favorable light.

      Substance over form is a way of adhering to the qualitative characteristics of the conceptual framework. Faithful representation which is related to this substance over form concept requires that ” financial information must not only represent relevant phenomena but must faithfully represent the phenomena that is purports to represent.”

      In my head I think of substance as a generic categorization e.g Plant and Machinery is capitalized as a Non Current Asset.

      To give an example lets say the law allowed you to categorize something as an orange even though these oranges are not real oranges but round pieces of plastic in an orange skin. What would be the right thing to do for people wanting information about the product you were selling – would it not be misleading to tell people that what you are holding are oranges?

  4. Profile photo of MikeLittle says

    Haymd, there are numerous replies by the opentuition team that repeatedly say “you can’t! It’s the only way we can keep the site free”

    Why would you want to spoil it for generations of students still to benefit from this free site.

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