![]() ![]() This is consistent with the balance sheet presentation. Therefore, we believe that the changes in right-of-use assets and lease liabilities arising from lease expense should be reported separately. However, ASC 230 does suggest that the reconciliation of net income to operating cash flows should separately report all major classes of reconciling items. Additionally, the general statement of cash flow guidance in ASC 230 provides limited guidance on applying the indirect method. ASC 842 does not explicitly address this question. Questions have arisen as to whether a single line presentation in the reconciliation to net income is appropriate with the two line items on the balance sheet. The combined change of the two accounts will generally equal the difference between the straight-line lease expense and the cash paid for leases. Under ASC 842, if a lessee is using the indirect method, both a right-of-use asset and lease liability are recorded as separate line items on the balance sheet for operating leases. In this case, no payments are required in the next 12 months (because there is a net cash inflow) so the entire lease liability is reflected as noncurrent. The cash inflows contemplated under the lease are included in the measurement of the overall lease liability and should not be netted against other current liabilities unless permitted by other applicable literature. This raises a question about what amount of the lease liability, if any, should be presented in current liabilities since the net amount for the period is an inflow. For example, if within one year of the balance sheet date, there is a lease incentive of $1,000,000 that will be received and the total lease payments to be paid during that period are $800,000, there would be a net $200,000 inflow. This generally occurs when a lessor agrees to reimburse the lessee for leasehold improvements. As discussed in LG 3.3.4.2, an in substance fixed lease incentive that is expected to be received after lease commencement should be included when measuring the lease liability. Transfers and servicing of financial assetsĬlassification of the lease liability as current or noncurrent is complicated if the lease incentive to be received within one year from the balance sheet date exceeds the lease payments due within that same period. Revenue from contracts with customers (ASC 606) Loans and investments (post ASU 2016-13 and ASC 326) Investments in debt and equity securities (pre ASU 2016-13) Insurance contracts for insurance entities (pre ASU 2018-12) Insurance contracts for insurance entities (post ASU 2018-12) IFRS and US GAAP: Similarities and differences Business combinations and noncontrolling interestsĮquity method investments and joint ventures ![]()
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