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Hi sir,
1)A company rents out its warehouse.A chemical had contaminated the land surrounding the land.The lessee had capitalised the warehouse and will use it for 5 years.Hence,who must recoginse the provision for the clean up cost.The lessee or lessor.
2)May I know what are ledgers the lessor must create when they lease out an asset when the lessee had capitalised the asset.
Thank you..
1. Depends who contaminated the land and who has the legal obligation to sort it out. If it’s the lessee – then lessee.
2. Depends on whether finance or operating lease – finance is receivables and operating is PPE – please review our lecture and notes
Don’t forget that lessee and lessor accounting now follow different rules – lessors still use FL and OL.
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