ACCA-F7-知识点总结

ACCA考试F7知识点辅导
I. The accounting problem
Before IAS37 provisions were recognized on the basis of prudence，little guidance was given on when a provision should be recognized and how it should be measured. This gave rise to inconsistencies，and also allowed profits to be manipulated.
Some problems are noted below：
(a) Provisions could be recognized on the basis of management intentions，rather than on any obligation to be entity;
(b) Several items could be combined into one large provision. There were known as ‘big bath’ provisions;
(c) A provision could be created for one purpose and then used for another;
(d) Poor disclosure made it difficult to assess the effect of provisions on reported profits. In particular，provisions could be created when profits were high and released when profits were low in order to smooth profits.
(1) Definitions
IAS 37 views a provision as a liability.
A provision is a liability of uncertainty timing or amount;
A liability is an obligation of an enterprise to transfer economic benefits as a result of past transactions or events.
Provision must be based on obligations，not management intentions.
(2) Under IAS37， a provision should be recognized：
a. When an enterprise has a present obligation;
b. It is probable that a transfer of economic benefits will be required to settle it;
c. A reliable estimate can be made of its amount; if a reasonable estimate cannot be made，then the nature of the provision and the uncertainties relating to the amount and timing of the cash flows should be disclose
d.
A provision is made for something which will probably happen. It should be recognized
when it is probable that a transfer of economic events will take place and when its amount can be estimated reliably.
(3) Contingent liabilities
Definition
The Standard defines a contingent liability as：
(a) A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or
(b) A present obligation that arises from past events but is not recognized because：
(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii) The amount of the obligation cannot be measured with sufficient reliability.
As a rule of thumb，probable means more than 50% likely. If an obligation is probable，it is not a contingent liability – instead，a provision is needed.
Treatment of contingent liabilities
Contingent liabilities should not be recognized in financial statements but they should be disclosed. The required disclosures are：
(a) A brief description of the nature of the contingent liability;
(b) An estimate of its financial effect;
(c) An indication of the uncertainties that exist;
(d) The possibility of any reimbursement;
(4) Contingent assets
Definition
A possible asset that arises from the past events whose existence will be confirmed by the occurrence of one or more uncertain future events not wholly within the enterprise’s control.
A contingent asset must not be recognized. Only when the realization of the related
economic benefits is virtually certain should recognition take place. At that point，the asset is no longer a contingent asset.
Disclosure：contingent assets
Contingent assets must only be disclosed in the notes if they are probable. In that case a brief description of the contingent asset should be provided along with an estimate of its likely financial effect.
II. Specific application
1. Future operating losses
In the past，provisions were recognized for future operating losses on the grounds of prudence. However these should not be provided for the following reasons.
①They relate to future events;
②There is no obligation to a third party. The loss-making business could be closed and the losses avoided.
2. Onerous contracts
An onerous contract is a contract in which the unavoidable costs of meeting the contract exceed the economic benefits expected to be received under it.
A common example of an onerous contract is a lease on a surplus factory. The leaseholder is legally obliged to carry on paying the rent on the factory，but they will not get any benefit from using the factory.
The least net cost of an onerous contract should be recognized as a provision. The least net cost is the lower of the cost of fulfilling the contract or of terminating it and suffering any penalty payments.
Some assets may have been bought specifically for the onerous contract. These should be reviewed for impairment before any separate provision is made for the contract itself.
1Demo
Droopers has recently bought all of the trade，assets and liabilities of Dolittle，an unincorporatd business. As part of the take-over all of the combined business’s activities have been relocated at Droopers main site. As a result Dolittle’s premises are now empty and surplus to requirements.
However，just before the acquisition Dolittle had signed a three year lease for their premises at $6000 per calendar month. At 31 December 2003 this lease ad 32 months left to run and the landlord had refused to terminate the lease. A sub-tenant had taken over part of the premises for the rest of the lease at a rent of $2500 per calendar month.
Required
(a) Should Droopers recognized a provision for an onerous contract in respect of this lease?
(b) Show how this information will be presented in the financial statements for 2003 and 2004. Ignore the time value of money.
Solution：
Droopers has a legal obligation to pay a further $192000 to the landlord，as a result of a lease signed before the year end. Therefore an onerous contract exists and must be provided for.
There is also an amount recoverable form the sub-tenant of $80000(32×2500). This will be shown separately in the balance sheet as an asset.
The $192000 payable and the $80000 recoverable can be netted off in the income statement.
income statements20032004
$$
provision for onerous lease contract
(net)112000 Dr.
net rental payable on lease (72-30)-42000 Dr
release of provision42000 Cr
112000 Dr.
balance sheets
receivalbes
amounts recoverable from sub-tenants80000 Dr.50000 Dr
liabilities
amounts payable on onerous contracts192000 Cr120000 Cr
3. Restructuring
A restructuring is a programme that is planned and controlled by management and has a material effect on：
①The scope of a business undertaken by the reporting entity in terms of the products or services it provides; or
②The manner in which a business undertaken by the reporting entity is conducted;
Restructuring includes terminating a line of business，closure of business locations，changes in management structure，and refocusing a business’s operations.
Restructuring provisions have always been quite common，and have often been misused. IAS37 restricts the recognition of restructuring provisions to situations where an entity has a constructive obligation to restructure.
A constructive obligation will only arise if：
①There is a detailed formal plan for restructuring. This must identify the businesses，locations and employees affected; and
②Those affected have a valid expectation that the restructuring will be carried out. This can be by starting to implement the plan or by announcing it to those affected.
The constructive obligation must exist at the year-end.(Any obligation arising after the year end may require disclosure under IAS10)
A board decision alone will not create a constructive obligation unless：
①The plan is already being implemented. For example，assets are being sold，redundancy negotiations have begun; or
②The plan has been announced to those affected by it. The plan must have a strict timeframe without unreasonable delays; or
③The Board itself contains representatives of employees or other groups affected by the decision.(This is common in mainland Europe.)
An announcement to sell an operation will not create a constructive obligation. An obligation will only arise when a purchaser is found and there is a binding sale agreement.
A restructuring provision should only include the direct costs of restructuring. These must be both：
(a) Necessarily entailed by the restructuring; and
(b) Not associated with the ongoing activities of the entity;
The following costs must not be provided for because they relate to future events：
(a) Retaining or relocating staff;
(b) Marketing;
(c) Investment in new systems and distribution networks;
(d) Future operating losses (unless arising from an onerous contract)
(e) Profits on disposal of assets.
cca f7真题对于acca f7的考试的重要性我相信各位acca考生都心知肚明了，首先我们先看一下acca f7科目的考试内容
ACCA F7科目介绍：
F7《财务报告》是F3《财务会计》的后续课程或说是升级课程。

F7大纲以概念框架开始，概念框架包括有用信息的质量特征还有一些在F3中已经学习过的基础会计知识。

接下来，大纲会更详绅地介绍管理框架和会计准则的制定过程，大纲的主要部分是介绍根据公认会计准则(GAAP)和相关会计准则下，独立公司的和集团公司的财务信息报告。

最后，大纲介绍了财务报告中信息的分析和理解。

acca f7考试题型：
一、选择题：
想要在选择题上拿分，就要对F7书上的各类知识点达到熟悉的程度。

对于ACCA新增的选择题，是没有重点可以依靠的，会涉及考纲所有的角落，因此学懂学全知识点才是硬道理，万万不能投机取巧。

ps：先练后面的大题再练选择题会简单很多。

二、报表题：
一定一定一定要把表的框架（模板）记住，并且是在练了大量题的基础上达到熟练的程度。

我比较喜欢的做报表题的顺序是先根据information写working再列报表框架，这样使得报表干净整洁，不会被框架限定住也不会遗漏一些item。

三、ratio analysis：
一般都是15分大题，其中有5分的ratio的计算题，至少10分写analysis。

在写分析的时候可以先把分析的三大部分—profitability、liquidity、gearing的框架列出来，在时间宽松的情况下可以一个一个按顺序写完，但如果时间紧，就先把每个部分的基本分析，如各个ratio是多少，是上升还是下降写出来，再有时间就可以深入分析，这样的话easy mark是可以完全拿到的！最后很重要的是在考前一个星期模拟考，找到适合自己的做题时间同时规定好每道题的做题时间，精确到每个小题是用时几分钟，最后至少留10～15分钟的机动时间。

ACCA F7考试重点：
I. The accounting problem
Before IAS37 provisions were recognized on the basis of prudence，little guidance was given on when a provision should be recognized and how it should be measured. This gave rise to inconsistencies，and also allowed profits to be manipulated.
Some problems are noted below：
(a) Provisions could be recognized on the basis of management intentions，rather than on any obligation to be entity;
(b) Several items could be combined into one large provision. There were known as ‘big bath’ provisions;
(c) A provision could be created for one purpose and then used for another;
(d) Poor disclosure made it difficult to assess the effect of provisions on reported profits. In particular，provisions could be created when profits were high and released when profits were low in order to smooth profits.
acca f7真题的重要性：
对于真题，我们除了要掌握单独的知识点，还要把他们串联在一起，并且能识别出题目考察的是哪些知识点的组合，而且它考的不仅仅是知识点，还有我们的思维能力和对商业环境的看法等等，所以我觉得对于像我这种准备时间不是很充分(复习基本在最后一个半月内完成)的话，重点是分析考官提供的答案，从长篇答案中总结他们的答题思路和大纲，然后再同自己的想法对比找到差距，看到自己思考的不缜密的地方加以修改。

我的这个办法屡试不爽，基本练习册每道题目我都会分析出提纲要点，这样在时间不够时，可以省去大篇幅写作时间而直接发现自己的丢分点，有利于形成总结思考能力，也可以在练习的过程中与考官的想法越来越贴近，揣摩出他的思维方式，若能以考官的思维来答题，相信定会万无一失。

Exam:
Part A: 15 MCQ * 2 mark
4 ：20 - 5：00
Part B: 3 case* 5 MCQ * 2 mark
5：00 - 5：55
Part C:
single financial statements and consolidated financial statements * 20 marks 3：00 - 3：50
Cash flow and ratio analysis * 20 marks
3：50 - 4：20
一分对应1.8 分钟
F7
Chapter 1 IASB CONCEPTUAL FRAMEWORK&ETHICS
1.IASB conceptual framework
2.two underlying assumption:accrual basis,going concern
★
3.Qualitative characteristics:relevance,faithful reprentaion(comple te,neutral and free from error)
Enhancing qualitative characteristics:comparability,verifiability,t imeliness,understandability. 4.资产的确认与计量：
①确认：elements:assets,liability,equity,income,expenses
②计量：measurement of financial statements:historical cost(历史成本),current cost(重置成本),net realizable value(可变现净
值),present value(现值).
存货可变现净值=存货估计售价—至完工估计将发生的成本—估计销售费用—相关税金现值（Present Value），也称折现值、贴现值、资本化价值（Capitalized Value），会计计量中的现值，是指对未来现金流量以恰当的折现率折现后的价值，是考虑货币时间价值因素等的一种计量属性
5.whistle blowing
6.acca fundamental principles on ethics:integrity(honest),object ivity(not allow bias), professional competence and due care,co nfidentiality,professional behavior.
7.CSR:environment report and sustainability.了解即可
Chapter 2 financial reporting framework
1.presentation of financial statement:
Going concern,accrual,consistency,materiality and aggregation(实质和聚集) ,offsetting(抵消), comparative.
2.SOFP,SOCI(P&L,OCI),SOCIE,SOCF,accounting notes（OCI,OCE,NCI）
3.会计政策变更与会计估计变更
会计政策变更: changes in accounting policies:
①法规要求；②使financial statement更加relevant 例:折旧——追溯法retrospective，追溯到能处理的最早年限，opening balance调整累计影响
会计估计变更：changes in accounting estimates:例：或有事项预计负
债坏账，存货毁损，公允价值变动，折旧年限,未来适用prospectively，仅仅对未来的事项产生影响
▲折旧：去年不计提折旧今年计提折旧——会计政策的变更，其他（折旧方法，折旧使用年限，折旧金额）——会计估计的变更
两者区别：measurement basis计量基础；method of presentation列表方式，recognition确认方式满足三个任意一个条件的变更可判断为会计政策变更3. 差错更正correction of prior period errors（包括错报、漏报、计算错误、会计政策使用错误、对事实情况的曲解、误解、欺诈）追溯法retrospective
Chapter 3 non-current asset
一、1.PPE(property,plant and equipment):
①定义(tangible,over one year,owner occupied)；
②计量：达到预定使用状态前发生的一切成本。

(purchase price less trade discount or rebate,not cash discou nt)注意记得加上present value of future clean-up costs 不包括试运行阶段产生的成本，直接费用化
Dr fin. Cost 85×6%
Cr provision 85×6%
①Unwinding是discounting的相反过程
②凡是以PV计价的会计金额未来都要考虑unwinding cost
2.capital expenditure and revenue expenditure
3.depreciation：土地不折旧不摊销，折旧计算无论商品是否闲置★
4.the cost model and the revaluation model
①重估增值会计分录录：
Dr PPE 20 Dr Dep. Expense 12 Dr Revaluation reserve
Cr OCI 20 Cr PPE 12 Cr RE 2
②重估减值会计分录：（不计入OCI,计入损益表,出于谨慎性prudence的原则）Dr P&L impairment loss
Cr PPE
③重估先增值再减值：
Dr PPE Dr RR
Cr OCI Dr P&L impairment loss
Cr PPE
④重估先减值再增值：(看做没有减值，持续折旧
Dr P&L impairment loss Dr PPE Cr PPE
Cr imp loss Cr OCI
#3
二、5.investment properties投资性房地产：①确认：（自用部分小，提供服务不重大，集团内部房产处理[单体investment property，集团PPE）；②计量：cost model or a fair value model(注意与PPE区别) ★
6.Fair value model
公允价值计量顺序：同时同地，同时不同地，以前发生的，折现
不允许计提折旧，公允价值变动（不管向上向下）全部计入损益表，无法可靠计量时使用成本法
7.changing model：
①PPE→investment property：当做revaluation处理
②investment property→PPE：公允价值当做初始入账价值
三、8.Intangible assets无形资产（IAS38 包括所有无形资产，除掉商誉）①确认：control,future economic benefits,identifiable
R&D:Ⅰ.research costs:全部计入损益表
Ⅱ.development costs:满足条件资本化：技术可行、完成意图、足够物力以完成、能用/卖、未来收益、可靠计量支出
▲Brands,mastheads,publishing titles,customer lists,similar items 不可看做资产，在单体报表上也无法体现，但是当涉及到合并报表时会对商誉有影响。

②计量：cost model and revaluation model
③amortisation
with a useful life,with a indefinite useful life(不能确定使用年限)对使用年限不确定的无形资产和商誉无论有无减值迹象，需每年做减值测试impairment
PART:A conceptual and regulatory framework
(考理论，section A 的选择题1-2道 2-4 分）
考点： IFRS framework 的作用及内容
1.1 framework为制定准则给相关board提供指引，准则没规定的处理遵循IFRS 的框架理念即可，若framework与具体的准则（IFRS or IAS）冲突了，以IFRS 为准。

1.2 framework 定义了财务报告的用途以及如何辨认财务信息的定性特征，定义了财务报告的三要素的确认及衡量的一些concepts 或assumption。

考点2：两大会计监管体系的区别
Rule-based system: provide more detailed regulations
Principle-based system: give rise fewer accounting standards and requires the exercise of more judgment.
Part B: IFRS/IASs
(一）IAS 16,12,17,33; IFRS15,19
IAS 16 property, plant&equipment
(section A or B 6-10 marks and section C 4-6 marks)
1.initial measurement
Dr: PPE
Cr: cash/payable @
●Purchase price
●Costs to bring asset to position/location for initial use
●Regular overhaul
●Removing&dismantling(和IAS 37 结合着考）
●Borrowing cost (IAS23)
2.subsequent measurement
IAS16 规定允许PPE 可以选择cost model 或者 revaluation model，一旦选择了，将不可追溯调整
在revaluation model下衡量PPE，其升值，减值的会计处理如下
考试口诀：
PPE升值进OCI，减值进P/L
先减值后升值，先用previous loss，再进OCI
先升值后减值，先用previous OCI，再进p/L
常考点：deferred tax effect of revalued asset:
JE: Dr OCI
Cr deferred tax
Liability
3.Depreciation
Straight line or reducing balance method.一旦更改折方法，不进行追溯调整
一旦重估后的资产，其折旧计算公式：revalued amount/remaining useful life。

题目会要求对excess depreciation从revaluation surplus转移到retained
JE：Dr revaluation surplus
Cr RE--只是代表所有者权益的变动，不影响档期损益4.Disposal
由单一科目disposal account汇集资产的销售行为：
JE: Dr cash/bank
Cr PPE
Cr disposal gain/loss
IAS12 Income tax
(section C的大题3.5分，也可能出现在A 或B 2-4 分）
INTERPRETATION OF CONSOLIDATED FINANCIAL STATEMENTS
If a subsidiary has been acquired in the year, the following impacts should be considered:
∙The current year’s financial statements will contain an entity which was not included in the previous period, so income, expenses, assets and liabilities are all likely to rise following the consolidation.
∙If the subsidiary has been acquired during the year, it is unlikely to have contributed a full year’s results in the statement of profit or loss. This could affect ratios such as return on capital employed or working capital ratios at the year end, as the full assets and liabilities are included in the statement of financial position, but only the post-acquisition income and expenses are included in the statement of profit or loss.
∙The new subsidiary is likely to have different margins to the rest of the group which will impact on the interpretation.
∙The new subsidiary is likely to have different customers, suppliers and inventory, so the working capital cycle is likely to be different.
∙Acquisition-related costs may have been included in the current period which will not be repeated in future periods.
∙ A new subsidiary may result in shared assets and synergies occurring within the group, for example, departments and properties may be merged.
If a subsidiary has been disposed of during the year, the following impacts should be considered:
∙Any prior year statement of profit or loss will involve a full year’s results from the subsidiary, while the current year will not.
∙Any prior year statement on financial position will contain the assets and liabilities relating to the subsidiary, whereas the current year will not.
∙The statement of profit or loss figures may contain the profit or loss on disposal of the subsidiary, and the subsidiary’s results up to the date of the disposal.
∙The statement of profit or loss may also contain some one-off costs relating to the disposal of the subsidiary, such as professional costs or redundancies.
∙The group may lose benefits from the subsidiary, such as supplies to the group, or skills held by the senior management of the subsidiary.
Revenue:
Step one in the five-step model requires the identification of the contract with the customer. Contracts may be in different forms (written, verbal or implied), but must be enforceable, have commercial substance and be approved by the parties to the contract. The model applies once the payment terms for the goods or services are identified and it is probable that the entity will collect the consideration. Each party’s rights in relation to the goods or services have to be capable of identification. If a contract with a customer
does not meet these criteria, the entity can continually reassess the contract to determine whether it subsequently meets the criteria.
Two or more contracts that are entered into around the same time with the same customer may be combined and accounted for as a single contract, if they meet the specified criteria. The standard provides detailed requirements for contract modifications. A modification may be accounted for as a separate contract or as a modification of the original contract, depending upon the circumstances of the case.
Step two requires the identification of the separate performance obligations in the contract. This is often referred to as ‘unbundling’, and is done at the beginning of a contract. The key factor in identifying a separate performance obligation is the distinctiveness of the good or service, or a bundle of goods or services. A good or service is distinct if the customer can benefit from the good or service on its own or together with other readily available resources and it is separately identifiable from other elements of the contract.
IFRS 15 requires that a series of distinct goods or services that are substantially the same with the same pattern of transfer, to be regarded as a single performance obligation. A good or service which has been delivered may not be distinct if it cannot be used without another good or service that has not yet been delivered. Similarly, goods or services that are not distinct should be combined with other goods or services until the entity identifies a bundle of goods or services that is distinct. IFRS 15 provides indicators rather than criteria to determine when a good or service is distinct within the context of the contract. This allows management to apply judgment to determine the separate performance obligations that best reflect the economic substance of a transaction.
Step three requires the entity to determine the transaction price, which is the amount of consideration that an entity expects to be entitled to in exchange for the promised goods or services. This amount excludes amounts collected on behalf of a third party – for example, government taxes. An entity must determine the amount of consideration to which it expects to be entitled in order to recognise revenue.
Additionally, an entity should estimate the transaction price, taking into account non-cash consideration, consideration payable to the customer and the time value of money if a significant financing component is present. The latter is not required if the time period between the transfer of goods or services and payment is less than one year. In some cases, it will be clear that a significant financing component exists due to the terms of the arrangement.
In other cases, it could be difficult to determine whether a significant financing component exists. This is likely to be the case where there are
long-term arrangements with multiple performance obligations such that
goods or services are delivered and cash payments received throughout the
arrangement. For example, if an advance payment is required for business
purposes to obtain a longer-term contract, then the entity may conclude that
a significant financing obligation does not exist.
If an entity anticipates that it may ultimately accept an amount lower than
that initially promised in the contract due to, for example, past experience of
discounts given, then revenue would be estimated at the lower amount with
the collectability of that lower amount being assessed. Subsequently, if
revenue already recognised is not collectable, impairment losses should be
taken to profit or loss.
Step four requires the allocation of the transaction price to the separate performance
obligations. The allocation is based on the relative standalone selling prices of the goods or services promised and is made at the inception of the contract.
It is not adjusted to reflect subsequent changes in the standalone selling
prices of those goods or services.
The best evidence of standalone selling price is the observable price of a
good or service when the entity sells that good or service separately. If that
is not available, an estimate is made by using an approach that maximises
the use of observable inputs – for example, expected cost plus an
appropriate margin or the assessment of market prices for similar goods or
services adjusted for entity-specific costs and margins or in limited
circumstances a residual approach. The residual approach is different from
the residual method that is used currently by some entities, such as software
companies.
When a contract contains more than one distinct performance obligation, an
entity should allocate the transaction price to each distinct performance
obligation on the basis of the standalone selling price.
This will be a major practical issue as it may require a separate calculation
and allocation exercise to be performed for each contract. For example, a
mobile telephone contract typically bundles together the handset and
network connection and IFRS 15 will require their separation.
Step five requires revenue to be recognised as each performance obligation is satisfied. This differs from IAS 18 where, for example, revenue in respect of goods is recognised when the significant risks and rewards of ownership of the goods are transferred to the customer. An entity satisfies a performance obligation by transferring control of a promised good or service to the customer, which could occur over time or at a point in time. The definition of control includes the ability to prevent others from directing the use of and obtaining the benefits from the asset. A performance obligation is satisfied at a point in
time unless it meets one of the following criteria, in which case, it is deemed to be satisfied over time:
∙The customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs.
∙The entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced.
∙The entity’s performance does not create a n asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.
Revenue is recognised in line with the pattern of transfer. Whether an entity recognises revenue over the period during which it manufactures a product or on delivery to the customer will depend on the specific terms of the contract.
If an entity does not satisfy its performance obligation over time, it satisfies it at a point in time and revenue will be recognised when control is passed at that point in time. Factors that may indicate the passing of control include the present right to payment for the asset or the customer has legal title to the asset or the entity has transferred physical possession of the asset.
As a consequence of the above, the timing of revenue recognition may change for some point-in-time transactions when the new standard is adopted.
In addition to the five-step model, IFRS 15 sets out how to account for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract and provides guidance to assist entities in applying the model to licences, warranties, rights of return, principal-versus-agent considerations, options for additional goods or services and breakage. IFRS 15 is a significant change from IAS 18 and even though it provides more detailed application guidance, judgment will be required in applying it because the use of estimates is more prevalent.
For exam purposes, you should focus on understanding the principles of the five-step model so that you can apply them to practical questions.
This article is relevant to Papers F7 and P2
Complex lease terms mean that it is often difficult to determine how they should be classified. This article examines IAS 17 and sheds some light on the matter
Leases are classified currently under IAS 17, Leases, as finance or operating leases at inception, depending on whether substantially all the risks and rewards of ownership transfer to the lessee. Under a finance lease, the lessee has substantially all of the risks and reward of ownership. Situations
that would normally lead to a lease being classified as a finance lease include the following:
∙the lease transfers ownership of the asset to the lessee by the end of the lease term
∙the lease term is for the major part of the economic life of the asset, even if title is not transferred ∙at the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset
∙the leased assets are of a specialised nature such that only the lessee can use them without major modifications being made
∙if the lessee is entitled to cancel the lease, the lessor's losses associated with the cancellation are borne by the lessee
∙gains or losses from fluctuations in the fair value of the residual fall to the lessee
∙the lessee has the ability to continue to lease for a secondary period at a rent that is substantially lower than market rent
All other leases are operating leases.
The lease classification is made at the inception of the lease but a lessee and lessor may agree to change the provisions of the lease. However, changes in estimates for example, changes in the residual value of a leased property, or changes in circumstances such as default by the lessee, do not give rise to a new classification of a lease. If the changes would have resulted in a different lease classification, had they been applied originally, then the revised lease agreement is treated as a new lease over the remaining lease term. The original accounting entries are not retrospectively amended.
Often lease indicators may not always point in the same direction causing lease classification to be difficult. Leases of specialised assets will usually be structured as finance leases. If an asset is specialised, then this implies that no other entity has a use for the asset. Consequently the lessor will only achieve its return on investment through the lease payments and it will structure the lease as a finance lease accordingly. If a lessor can sell or lease non-specialised assets to other parties at the end of the lease and is willing to accept the financial risk on this then this could be an indicator of an operating lease. Assets of a non-specialised may become specialised. For example, leased plant and equipment may be permanently installed in a building and its removal at the end of the lease may be impractical or too expensive for the lessor. Often specialised assets may have a significant remaining life at the end of the lease and sometimes this remaining life may be the major part of the economic life of the asset and therefore this indicator will point to it being an operating lease. However, it may be appropriate to disregard this indicator. Normally for there to be an operating lease with a significant part of the assets life remaining, there needs to be some realisation of funds through sale or further rentals. However, in the case of a。