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Hi Mike, re the Q4/2010 part two, I found it very confusing as why the sales and operating lease back is recognized in the same way as finance lease back? Since it’s sold at FV and lease back at market rental, shouldn’t the gain on disposal been recognized on p/l and the lease should just be recognised as operating expense on P/l? Is it because the requirement said ‘assuming the op lease is recognized as an asset’? Thanks for your help!
This is as a result of the exposure draft from 2009 suggesting the treatment of all leases in the same way. An operating lease is more than just rental of an asset. It involves also the “right-of-use” of the affected plant and that itself is an asset. The question tells you to assume that the operating lease is recognised as an asset so is pushing down the road of the new ED.
Now, here’s some news from the last 10 days!
The IASB has issued a new IFRS on leasing which confirms the treatment of the Exposure Draft in that all leases are to be treated the same way and written off on a straight line basis over the life of the lease agreement.
Now that new IFRS cannot be included in the exam next Tuesday. However, the leasing problem was apparent 2 years ago when the examiner set the paper so there could be something in there about leasing. Wouldn’t it be just a bit impressive if you were to be able to mention the issue of the new IFRS in your answer!
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