15-32 Intermediate Accounting, 8/e
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Present value of minimum lease payments. Under
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Recognizing a gain on a sale and leaseback
T15-23
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1. Spreadsheet Activity
Have students create a functional lease amortization schedule in Excel. Suggest that the spreadsheet:
1. Include cells for the number of periods, the interest rate, the present value of cash flows, and
2. An advanced step would be to have a cell in which the user can: Enter “1” if payments are at
3. The initial balance can be made to calculate the PV if that amount is not provided by the user
in the PV cell, and to calculate the payments if the PV is provided by the user in the PV cell.
Thus, if “PV” is blank, the calculation will default to the “Payment.”
Provide students with various variable values to conduct several “what if?” exercises.
2. Google Analysis
1. Compare the Company’s lease commitments, both capital and operating, with those in the 2014
report that is packaged with all new texts. Are there any discernible trends? How might they
be interpreted?
2. Are there any sale-leaseback transactions?
3. Are any lease transactions reported on the statement of cash flows? If so, how?
4. Read “Management’s Discussion and Analysis of Results of Operations and Financial
Condition,” and determine management‘s view of PetSmart’s current and future lease position.
3. Professional Skills Development Activities
The following are suggested assignments from the end-of-chapter material that will help your
students develop their communication, research, analysis, and judgment skills.
Communication Skills. Research Case 15-2 and IFRS Cases 15-5 and 15-10 are suitable for
student presentation(s). In addition to Communication Cases 15-3 and 15-8, Research Case
15-2 can be adapted to ask students to write a memo to the Controller supporting their position.
Question 11, Problem 15-4, and Ethics Case 15-4 create good class discussions. In addition to
Communication Case 15-3 and Analysis Case 15-1 do well as group assignments. Discussion
Questions 15-6 and 15-11, and Real World Cases 15-5 and 15-6 create good class discussions.
Research Skills. In their professional lives, our graduates will be required to locate and extract
relevant information from available resource material to determine the correct accounting
Analysis Skills. The “Broaden Your Perspective” section includes Analysis Cases that direct
students to gather, assemble, organize, process, or interpret date to provide options for making
business and investment decisions. In addition to Analysis Case 15-1, Exercises 15-8, 15-9,
and 15-10, Communication Case 15-3, and Real World Cases 15-5 and 15-6 also provide
opportunities to develop analysis skills.
15-6, and 15-7, and Trueblood Case 15-8 also require students to exercise judgment.
15-36 Intermediate Accounting, 8/e
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Learning Est. time
Questions Objective(s) Topic (min.)
15-1
2
Substance over form
5
15-2
2
Interest on leases
5
15-3
2
Leases and installment notes compared
5
15-4
3
Lease classification
5
15-5
3
Lease classification
5
15-6
7
Bargain purchase option
5
15-7
3
Lease classification
5
15-8
5
Present value of lease payments
5
15-9
7, 8
Bargain purchase option and residual value
5
15-10
9
Executory costs
5
15-11
9
Discount rate
5
15-12
9
Contingent leases
5
15-13
9
Initial direct costs
5
15-14
9
Initial direct costs
5
15-15
3
Disclosures
5
15-16
10
Sale-leaseback transaction
5
15-17
10
Leases that involve land
5
15-18
10
Leases that involve land
5
15-19
10
Leveraged leases
5
15-20
11
IFRS
5
15-21
11
IFRS
5
15-22
11
IFRS
5
15-23
11
IFRS
5
Brief Learning Est. time
Exercises Objective(s) Topic (min.)
15-1
4
Operating Lease
5
15-2
4
Operating lease
5
15-3
4
Operating lease; advance payment
5
15-4
3, 5
Lease classification
5
15-5
3, 5
Lease classification
5
15-6
5
Net investment in lease; Sonic
5
15-7
5
Capital lease; calculate interest
5
15-8
5
Capital lease; lessee; balance sheet effects
5
15-9
5
Capital lease; lessee; income statement effects
5
15-10
6
Sales-type lease; lessor; income statement
effects
5
15-11
6
Sales-type lease; lessor; calculate lease
payments
5
15-12
5, 6, 7
Bargain purchase option; lessor; direct financing
lease
5
15-13
5, 6, 8
Guaranteed residual value; direct financing
lease
5
15-14
3, 11
Lease classification; IFRS
10
Learning Est. time
Exercises Objective(s) Topic (min.)
15-1
4
Operating Lease
15
15-2
4
Operating lease; advance payment; leasehold
improvement
15
15-3
5
Capital lease; lessee
25
15-4
5
Direct financing lease; lessor
25
15-5
6
Sales-type lease; lessor
20
15-6
3
Lease classification
25
15-7
5
Capital lease
20
15-8
5
Capital lease; balance sheet and income
statement effects
30
15-9
5
Direct financing lease; balance sheet and income
statement effects
30
15-10
6
Sales-type lease; balance sheet and income
statement effects
30
15-11
3, 11
Lease classification; IFRS
35
15-12
5
Lessor calculation of annual lease payments;
lessee calculation of asset and liability
20
15-13
5
Lessor calculation of annual lease payments;
lessee calculation of asset and liability
20
15-14
5, 6, 8
Calculation of annual lease payments; residual
value
25
15-15
5, 6, 8
Lease concepts; direct financing leases;
guaranteed and unguaranteed residual value
35
15-16
5, 6, 7
Calculation of annual lease payments; BPO
25
15-17
5, 6, 7
Capital lease; bargain purchase option; lessee
25
15-18
5, 6, 7
Bargain purchase option; lessor; direct financing
lease
25
15-19
5, 6, 8, 9
Executory costs; lessor and lessee
20
15-20
5, 6, 8, 9
Executory costs plus management fee; lessor
and lessee
15
15-21
4, 5, 6, 9
Lessor’s initial direct costs; operating, direct
financing and sales-type leases
30
15-22
9
Lessor’s initial direct costs; operating lease
15
15-23
9
Lessor’s initial direct costs
20
15-24
9
Lessor’s initial direct costs; sales-type lease
15
15-26
10
Sale-leaseback; capital lease
20
15-27
10, 11
IFRS; sale leaseback; capital lease
15
15-28
10
Sale-leaseback; operating lease
15
15-29
10, 11
IFRS; sale leaseback; operating lease
10
15-30
10
FASB codification research; sale leaseback
20
15-25
3 – 9
Concepts; terminology
25
15-31
10
Real estate lease; land and building
20
15-32
1, 4, 7
FASB codification research
20
15-38 Intermediate Accounting, 8/e
CPA/CMA Learning Est. time
Exam Questions Objective(s) Topic (min.)
CPA-1
3
3
CPA-2
5
3
CPA-3
5
3
CPA-4
6
3
CPA-5
7
3
CPA-6
8
3
CPA-7
9
3
CPA-8
10
3
CPA-9
11
3
CPA-10
11
3
CPA-11
11
3
CMA-1
5
3
CMA-2
7
3
CMA-3
9
3
Learning Est. time
Problems Objective(s) Topic (min.)
15-1
4
Operating lease; scheduled rent increases
15
15-2
5, 7
Lease amortization schedule
25
15-3
3, 5, 6
Direct financing and sales-type lease; lessee
and lessor
30
15-4
5
Capital lease
20
15-5
5
Capital lease; financial statement effects
35
15-6
5
Direct financing lease; financial statement
effects
35
15-7
6
Sales-type lease; financial statement effects
45
15-8
3, 5, 8
Guaranteed residual value; direct financing
lease
45
15-9
6, 8, 9
Unguaranteed residual value; executory
costs; sales-type lease
55
15-10
3, 6, 7, 9
Bargain purchase option exercisable before
lease term ends; executory costs; sales-type
lease
45
15-11
3, 4, 5, 8
Operating lease to lessee – capital lease to
lessor
50
15-12
3, 5, 8
Lease concepts; direct financing leases;
guaranteed and unguaranteed residual value
25
15-13
3, 5, 6, 8, 9
Lease concepts
60
15-14
3, 5, 9
Executory costs; lessor and lessee
30
15-15
3, 5, 6, 7, 8
Sales-type lease; bargain purchase option
exercisable before lease term ends; lessor
and lessee
35
15-16
3, 5, 8, 9
Lessee-guaranteed residual value; third
party-guaranteed residual value;
unguaranteed residual value; executory
costs; different interest rates for lessor and
lessee
60
15-17
5
Integrating problem; bonds, note, lease
50
15-18
3, 5, 9
Initial direct costs; direct financing lease
50
15-19
3, 5, 9
Initial direct costs; sales-type lease
35
15-20
5, 10
Sale-leaseback
25
15-21
10
Real estate lease; land and building
25
15-22
10, 11
IFRS; real estate lease; land and buildings
25
Star Problems
15-40 Intermediate Accounting, 8/e
Learning Est. time
Cases Objective(s) Topic (min.)
Analysis Case 15-1
1, 2, 3, 4, 5
Reporting leases; off balance sheet financing;
PetSmart
30
Research Case 15-2
1, 2, 3, 4, 5
Locate and extract relevant information and
authoritative support for a financial reporting
issue; capital lease; sublease of a leased asset
60
Communication Case 15-3
3, 7, 8
Classification issues; lessee accounting
40
Ethics Case 15-4
3
Leasehold improvements
20
Real World Case 15-5
1, 2, 4, 5, 6
Lease concepts; Walmart
35
Real World Case 15-6
10
Sale-leaseback; FedEx
50
Communication Case 15-7
1, 2, 3, 10
Where’s the gain?
45
Trueblood Case 15-8
3
Lease incentives
45
IFRS Case 15-9
1, 2, 3, 11
Lease classification; U.S. GAAP: IFRS
35
Air France Case
11
30
CPA Simulation 15-1 Worksheet pertaining to interest revenue
recognition; capital lease; sales type lease;
judgment concerning bargain purchase
options, residual value, and sale-leaseback
arrangements; communication; research
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Learning Est. time
Questions Objective(s) Topic (min.)
15-24
Types of leases
5
15-25
Type B lease; lessee
5
15-26
Type B lease; lessor
5
15-27
Type A lease; lessee and lessor
5
15-28
Type B lease; lessee and lessor
5
15-29
Front-loading of lease expense/revenue
5
15-30
Right-of-use model
5
15-31
Short term lease
5
Brief Learning Est. time
Exercises Objective(s) Topic (min.)
15-15
4
Lessee; effect on earnings; Type A lease
5
15-16
4
Lessee; effect on earnings; Type B lease
5
15-17
4
Lessor; effect on earnings; Type B lease
5
15-18
4
Lessee; effect on balance sheet; Type A lease
5
15-19
3, 5
Lessee; effect on balance sheet; Type B lease
5
15-20
3, 5
Lessee; accrued interest; balance sheet effects;
Type A lease
5
15-21
5
Lessee; accrued interest; income statement
effects; Type A lease
5
15-22
5
Lessor profit; income statement effects; Type A
lease
5
15-23
5
Lessee and lessor; calculate interest; Type A
lease
5
15-24
5
Short-term lease
5
Learning Est. time
Exercises Objective(s) Topic (min.)
15-33
4
Lessee; amortization schedule; journal entries;
Type A lease
15
15-34
4
Lessor; amortization schedule; journal entries;
Type A lease
15
15-35
5
Lessee; journal entries; Type B lease
25
15-36
5
Lessor; journal entries; Type B lease
25
15-37
6
Lessee; amortization schedule and journal
entries; Type A lease
20
15-38
3
Short-term lease
25
15-42 Intermediate Accounting, 8/e
Learning Est. time
Problems Objective(s) Topic (min.)
15-23
4
Lessee and lessor; Type A lease; profit on sale
15
15-24
5, 7
Lessee; effect on financial statements; Type B
lease
45
15-25
3, 5, 6
Lessee; balance sheet and income statement
effects; Type A lease; Type B lease
30