Hi Chris, In the identification of lease practice question, I answered the 1st scenario as no lease and I gave my reason that it appears that Peach do not have the right to control the rail carts schedule to direct it as per their timetable to obtain the maximum of economic benefits present. It that correct?
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Annabel·
I love your teaching so much Chris...God bless you !!
I assume rail cars have pretty long useful life (longer than 5 years). So in the first scenarion I assume that the cars can still be used for a long time after the 5 years contract with Peach. So, to me it looks like Peach wouldn't receive substantially all of the economic benefits from those 10 rail cars, or am I wrong in thinking so?
Thank you.
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ninsy26·
He said you should search for them
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Ajil·
What's the difference b/w a particular railcar and a specified railcar?
If both are same then how do we figure out the supplier has sub rights?
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zackyahamed·
same doubt
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Nishi·
Because in specified contextually the lessor will direct the use of which asset. In the first one there is only one particular rail for the lease period
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Nishi·
Because in “specified” contextually the lessor will direct the use of the asset and which asset should be used. In the first one there is only one particular rail for the lease period no substitution
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aarina·
youre hands down the most entertaining tutor. lol i greatly enjoyed sbr because of you otherwise id be dozing off. Your energy in delivering lecture on what could be a dry subject, is lauded..
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Billy·
If a contract is not a lease, what is it? How is it accounted for?
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P2-D2Tutor·
Hi,
The customer would treat the payments as an expense through profit or loss on an accruals basis.
Thanks
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niggerbert·
It will treated as contract that Creates a Financial Asset and Financial Liability in the respective Parties. Essentially in the books of the "Lessee" this a loan arrangement
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samuraijack·
I think these examples is very confusing. First in terms control and right to substitute: "10 cars of particular type"... The lessor might have three thousand of this type of rail cars (for example three wheeled red rail cars) and makes available juts 10 of them to the lessee when needed. Also there is no information who controls the cars when they are not transporting the goods of the lessee, yes? it leads us to second confusion: does the lessee receive substantially all benefits from the use of the asset during these years? I think there is not enough info about it in the scenario.
Am I wrong?
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P2-D2Tutor·
Hi,
The example has tried to keep it as simple as possible, but yes we could have included more information to determine if it is or isn't a lease.
The specific contracts between the two parties would give the details of the rail cars used and whether or not all of the economic benefits are received, but in the absence of this information the assumption has been that the particular cars are such that the customer controls their usage and receives the economic benefit for their usage.
If additional information was included at an early stage within the lectures then I doubt that it would help and may lead to students struggling before they then get in to the rest of the chapter, but I like how you've been thinking about the issue, well done.
I assume rail cars have pretty long useful life (longer than 5 years). So in the first scenarion I assume that the cars can still be used for a long time after the 5 years contract with Peach. So, to me it looks like Peach wouldn't receive substantially all of the economic benefits from those 10 rail cars, or am I wrong in thinking so?
Thank you.
If both are same then how do we figure out the supplier has sub rights?
The customer would treat the payments as an expense through profit or loss on an accruals basis.
Thanks
Am I wrong?
The example has tried to keep it as simple as possible, but yes we could have included more information to determine if it is or isn't a lease.
The specific contracts between the two parties would give the details of the rail cars used and whether or not all of the economic benefits are received, but in the absence of this information the assumption has been that the particular cars are such that the customer controls their usage and receives the economic benefit for their usage.
If additional information was included at an early stage within the lectures then I doubt that it would help and may lead to students struggling before they then get in to the rest of the chapter, but I like how you've been thinking about the issue, well done.
Thanks