[SOUND]

[MUSIC]

In this lesson, we'll do an example of a sales-type lease and

see what the accounting looks like.

So let's look at the mechanics.

We use an example that's in the ASC to illustrate how a sales-type lease is

accounted for.

We're going to use example 1, Case A.

So here are the facts from the FASB example.

We've got a guaranteed residual of $13,000, an estimated residual of $20,000,

so there's $7,000 unguaranteed.

Lease term of 6 years, implicit rates 5.48%.

Present value of the estimated lease, $62,000.

Present value guaranteed, $56,919, etc, etc.

So let's determine the discount rate.

Now the rate was given at 5.48%, but how is it calculated?

Again, it's a rate where the present value of the rents and the present value of

the estimated residual is equal to the fair value of the underlying asset.

So we can calculate that.

Why didn't we include the initial direct costs?

Because the fair value is not equal to the carrying value of the asset of $54,000,

so those initial direct costs are going to be expensed.

So we can calculate the discount rate and it's going to come out to 5.48%.

Let's do that, and then go classify the lease.

So let's take a look at the accounting for a sales-type lease.

It's a little bit more complicated than just a regular lease,

because we're also accounting for a sale.

And when we're accounting for a sale, we also have to take into account then,

cost of sales, cost of goods sold, and the revenue that's calculated on that.

So here's our problem.

We had a lease payment of $9,500.

We have an estimted residual at the end of the lease term.

The account that we're expecting to get when we dispose of the asset

at the end of the lease of $20,000.

That's how we're pricing the lease.

But we're only guaranteed from the lessee that we're going to get $13,000.

So the lease term is six years, there's our implicit rate.

The present value of those estimated lease payments at that rate are $62,000.

The present value of guaranteed though is only $56,919.

We've got a difference because I've got a difference between the estimated amount

here that's the estimated residual, and the guaranteed residual.

The unguaranteed amount that we're getting is $5,081.

So the fair value is $62,000.

Carrying value, $54,000.

So let's scroll down and take a look at what we've got classifying this.

Is this a finance lease?

Well there's no transfer of title, there's no bargain purchase.

But the present value is more than 91% of the fair value of the asset,

so we would qualify for a sales-type lease.

The term is greater than 75%, no, but we already are qualified.

So let's scroll down and take a look at our journal entry.

So the net investment of the lease will be $62,000.

That's equal to the total amount that we've got,

including the guaranteed and unguaranteed residual value.

But the cost of goods sold is only going

to take into account the guaranteed portion.

We're not going to recognize revenue, and

we're not going to recognize cost of goods sold for the unguaranteed portion.

So we're allocating between those two, but

we are going to derecognize the inventory.

And we are going to of course, also record our initial costs, and our cash and

payables.

And not being capitalized in this particular case.

So when we record our first lease payment, where we record the cash coming in,

where we record interest revenue, and we'll decrease the revenue in the lease.

And the lease will amortize down.

And it's calculated, again, by taking the effective rate times

the investment in the lease in each period in recognizing

interest revenue in this case, because we're the lessor.

So let's go back to our problems.

So when we classify the lease, it came back that when using the guaranteed

residual, not the estimated residual, we came back that it was a finance lease.

We had a present value greater than 90% of the fair value, so

we would classify this as a sales-type lease.

Not that if that guarentee was from a third party,

this would not be a sales-type lease, it would've been a direct-financing lease.

So the initial entry will be to record a sale of the underlying asset in the lease.

So we've got the net investment in the lease of $62,000,

with cost of goods sold, the carrying value.

The initial costs, the revenue, the equipment inventory, the cash and

payables for the initial cost as we discussed.

The rents collected in arrears, that's a little bit unusual.

As you collect the rent each year, you would record cash and interest revenue,

and then a reduction in the investment in the lease.

This schedule here does include the estimated residual value as we discussed.

So that's an example of a sales-type lease.

This is going to be the default type of finance lease for lessors.

Sales-Type Lease Example

Accounting Analysis II: Measurement and Disclosure of Liabilities

Conheça os instrutores