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Leases Accounting For Lessor Notes

Accounting Notes > Accounting (Special Edition) Notes

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Leases Accounting by Lessor http://www.youtube.com/watch?feature=player_embedded&v=XthpgfHsIO8

In this lesson we will study the accounting by lessor and the Pension plan treatment in financial reporting Definition A leasing agreement is an agreement whereby one party, the lessee, pays lease rentals to another party, the lessor in order to gain the use of an asset over a period of time. Pension Liabilities are the future liabilities resulting from pension commitments made by a corporation In other words A lease guarantees the lessee use of an asset and guarantees the lessor regular payments from the lessee for a specified period. A pension plan consists of a pool of assets and a liability for pensions owed to employees. Pension plan assets normally consist of investments, cash and (sometimes) properties. The return earned on the assets is used to pay pensions.

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Why is it important?
Leasing offers a number of important advantages: Leasing increases purchasing power Leasing balances usage and cost Leasing provides fixed rate financing Leasing is convenient Leasing is tax-advantaged Leasing provides flexible payments Pension Plans are important for the company to retain employees for long period of time and also it is a statutory requirement.

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Lecture Notes There are two types of lease: finance lease operating lease. A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. A finance lease (as its name suggests) is basically a way of financing the use of an asset (by spreading the payment over the life of the asset instead of paying the full amount all at once). An operating lease is any lease other than a finance lease

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