7. Average age=accumulated depreciation / annual depreciation expense Average depreciable life = ending gross investment / annual depreciation expense
Remaining useful life = ending net investment / annual depreciation expense = average age - average depreciable life
Average total useful life = average age + remaining useful life 8. A lease must be treated as a finance(capital) lease if any one of the criteria is met: title is transferred to the lessee at the end of lease period; a bargain purchase option exists; lease period is 75% or more of the asset’s economic life; present value of lease payments is 90% or more of the fair value.
9. Under GAAP, interest expense of finance lease is reported as outflow from operating activities, and the principal payment is outflow from financing activities. Under IFRS, interest expense can be reported as outflow from operating activity or financing activity. 10. Financial statement impact of lease accounting:
Ratio impact of lease accounting:
总的来说，finance lease的指标比operating lease都要差。 11. Adjusted operating lease to capital lease: adjusted EBIT = EBIT + lease expense - adjustment to depreciation; adjusted interest expense = interest expense + assumed interest expense on leases.
Reading23 Intercorporate Investments 1. accounting for investments:
2. summary of classifications of financial assets:
3. Under IFRS, business combinations are not differentiated. Under GAAP, business combinations are categorized as: merger - the acquiring firm survives; acquisition – both survives in a parent-subsidiary relationship; consolidation – a new entity is formed; special purpose entities – a special purpose entity is typically created for a single purpose by a sponsoring company. 4. acquisition method vs. equity method:
