Long Terms Liabilities

Question 1

Under US GAAP and IFRS, what classifies a lease as a finance lease?

Answer 1

-ownership transferred to lessee
-lessee is reasonably certain to exercise a purchase option
-lease covers a major part of the asset‘s useful life
-pv of lease payments =~ fair value
-asset has not alternative use

Question 2

How do US GAAP and IFRS differ in lessee accounting?

Answer 2

IFRS : all lease create ROU, Lease payable Liability and separate reporting for interest/amortization
US GAAP : Finance lease same as IFRS, Operational lease ROU asset and liability recognized but interest+amortization combined as a single lease expense

Question 3

How do lessors account for finance vs operational lease ?

Answer 3

-Finance : recognize lease receivable and interest income, remove leased asset
-Operating :keep asset on balance sheet, recognize lease income, no interest revenue recognized

Question 4

What is the difference between defined contribution and defined benefit plans?

Answer 4

DCP employer contributes a fix amount, DBP employer promises a future benefit

Question 5

How are DBP accounted for under IFRS?

Answer 5

-P&L : Service cost (current+past)+ net interest on opening net asset/liability
-OCI : Remeasurements
-OCI remeasurements are not amortized to profit or loss

Question 6

How are DBP accounted for under IFRS?

Answer 6

-P&L (current period): Service cost + interest on obligation - expected return on plan assets
-OCI -> P&L over time : past service costs and actuarial gains/losses
-Presentation : Pension expense is embedded in COGS or SG&A and mainly explained in the notes

Question 7

How are share-based compensations plans reported?

Answer 7

Under both IFRS and US GAAP, companies estimate the fair value of the share-based compensation at the grant date and recognize it as compensation expense over the plan‘s vesting schedule.