Page 16 - CFA Lecture Day 10 Slides
P. 16
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
Operating lease No effect on balance sheet Rent expense = lease payment
(No Asset or Liability) recognised in lessee’s income statement
(CFO –outflow in cash flow statement)
Finance lease Lower of PV of future Asset is depreciated in the income
tanties
minimum lease payments or statement and interest expense (= lease
fair value is recognised as both liability at the beginning of the period *
an Asset and a Liability
lease interest rate) is recognised.
In the Cash flow IFRS US GAAP
statement
Operating lease CF impact captured via net CF impact captured via net income/CFO
income/CFO
Finance lease Lease payment is split into interest Lease payment is split into interest and
and principal: principal components:
• Interest = CFO or CFF (outflow) • Interest paid = CFO (outflow)
• Principal = CFF (outflow) • Principal = CFF (outflow)
