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Section 8130: Capital Leases
1. Additional criteria for lessor
(E) Collectibility of minimum lease payment
--> reasonably predictable
(F) No important uncertainties
--> about the additional costs to be incurred by lessor
--> when such costs are not reimbursable
2. Capital lease by lessee
(1) A lease meets any of (A), (B), (C), (D)
(2) The leased property is recognized as an asset by lessee
3. Capital lease by lessor
A lease is classified as one of the following
(a) sales-type lease
(b) direct financing lease
(c) leveraged lease
4. Sales-type lease
(1) A lease satisfies any of (A), (B), (C), (D) and both of (E), (F)
(2) The lessor gets manufacturer's or dealer's profit or loss
5. Direct financing lease
(1) A lease satisfies any of (A), (B), (C), (D) and both of (E), (F)
(2) The lessor does not get manufacturer's or dealer's profit
(3) A lease does not meet the leveraged lease criteria
6. Leveraged lease
(1) A lease satisfies any of (A), (B), (C), (D) and both of (E), (F)
(2) The lessor does not get manufacturer's or dealer's profit
(3) A lease meets all of (G), (H), (I)
7. Leveraged lease combines two transactions into one
Transaction 1: lessor borrows money and purchases the leased property
Transaction 2: lessor leases the property to lessee
8. Manufacturer's or dealer's profit or loss
--> when fair value ≠ carrying amount of the leased property
--> profit when fair value > carrying amount
--> loss when fair value < carrying amount
9. Leveraged lease criteria
(G) A lease involves at least three parties
--> a lessee, a lessor (equity participant), a long-term creditor
(H) Financing by long-term creditor
--> provides substantial leverage to the lessor
--> is nonrecourse as to the lessor's general credit
(I) Lessor's net investment
--> declines during early periods
--> rises during later periods
10. Capital lease accounting by lessee
--> Recognize the leased property as an asset
--> and recognize a liability for lease payment
11. Accounting by lessor
(1) Sales-type lease
--> The lessor records the lease same as a sale of the property
--> Sales, cost of goods sold, lease receivable, unearned income are recognized by the lessor
(2) Direct financing lease
--> Asses is derecognized from the lessor's records
--> Lease receivable, unearned income are recognized by the lessor
(3) Leveraged lease
--> The lessor recognizes the following:
(a) rentals receivable
(b) unearned and deferred income
(c) residual value of leased property
(d) investment tax credit, if applicable
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