Page 17 - FINAL CFA I SLIDES JUNE 2019 DAY 9

LOS 31.h: Determine the initial recognition, Session Unit 8:
initial measurement, and subsequent 31. Non-Current (Long-Term) Liabilities
measurement of finance leases., p.283

Example: Accounting for a finance lease, p284: AC leases a machine for own use for 4 years (annual
payments of $10,000). At the end, the machine is returned to the lessor at scrap value. Lease interest rate is
6%. Depreciation = straight-line; lease payments at year end).
Calculate the impact of the lease on AC’s balance sheet and income statement for each of the four
years, including the immediate impact
This is a finance lease –terms is over 75% useful life!
Amount initially
recorded as A and L
tanties

• Depreciation = $34,651 / 4 = $8,663 per year.