11-05-2010, 06:50 PM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by zia ahmad</i>
<br />AOA.
My question is what is SALE TYPE LEASE?
and what is FINANCE TYPE LEASE?
Is there is difference in treatment
of above both leases?
regard's
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dear Mr. Zia
IAS ¡V 17 gives the different type of lease i-e, Finance lease, Operating Lease and Sales and lease back in respect of both leaser and lessee.
Recognition criteria regarding type of lease.
IN RESPECT OF LESSEE
01 FINANCE LEASE
Finance lease recognized when following criteria shall meet.
âX Major life of asset used by Lease.
âX MLP is equal to FMV or approx.
âX All risk and reward transfer to lessee from lesser.
âX Asset have a specialized nature.
âX Lessee have a power to purchase the asset at the end of lease term
If the above criteria are meet then such lease is Finance lease and in this respect Lessee recognized the asset in its BOA and charged depreciation regarding asset life and responsible to all repairs and maintenance relating to asset.
02 OPERATING LEASE
In this type of lease, No any asset is recognized in BOA of Lessee and no depreciation shall charge. Lease rental shall be treated as rental expense over the lease period.
03 Sales and Lease Back
If an entity required funds relating to business activity then entity has a option to sale its asset with profit margin and lease back ,
In this situation a deferred profit shall be recognized and which is amortized over the lease period.
sale and back either can be operating or finance lease, for this purpose the above mentioned criteria shall be mandatory to recognized Finance or Operating Lease.
I think now your confusion shall be clear.
Regrds..
Um@r
<br />AOA.
My question is what is SALE TYPE LEASE?
and what is FINANCE TYPE LEASE?
Is there is difference in treatment
of above both leases?
regard's
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dear Mr. Zia
IAS ¡V 17 gives the different type of lease i-e, Finance lease, Operating Lease and Sales and lease back in respect of both leaser and lessee.
Recognition criteria regarding type of lease.
IN RESPECT OF LESSEE
01 FINANCE LEASE
Finance lease recognized when following criteria shall meet.
âX Major life of asset used by Lease.
âX MLP is equal to FMV or approx.
âX All risk and reward transfer to lessee from lesser.
âX Asset have a specialized nature.
âX Lessee have a power to purchase the asset at the end of lease term
If the above criteria are meet then such lease is Finance lease and in this respect Lessee recognized the asset in its BOA and charged depreciation regarding asset life and responsible to all repairs and maintenance relating to asset.
02 OPERATING LEASE
In this type of lease, No any asset is recognized in BOA of Lessee and no depreciation shall charge. Lease rental shall be treated as rental expense over the lease period.
03 Sales and Lease Back
If an entity required funds relating to business activity then entity has a option to sale its asset with profit margin and lease back ,
In this situation a deferred profit shall be recognized and which is amortized over the lease period.
sale and back either can be operating or finance lease, for this purpose the above mentioned criteria shall be mandatory to recognized Finance or Operating Lease.
I think now your confusion shall be clear.
Regrds..
Um@r
