USA ASC-842 Current Asset turned into a Finance Lease

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If a current asset is turned into a Finance Lease, is it correct to fully disposal of the current asset and then set it us as ROU and amortize over the life of the ROU?
 
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Hi Corporate Accountant,

You are asking about a lease involving a current asset. Current assets are things like cash, accounts receivable, prepaid expenses and so on. It would be extremely unlikely to involve such things in a lease. Do you mean a lease involving a fixed asset?

Thanks

Kat
 
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It was our fixed asset and is now a finance lease - a finance lease, also referred to as a capital lease or sales lease, is a type of commercial lease in which a finance company is the legal owner of an asset, and the user rents the asset for an agreed-upon period of time.
 

BIG E

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Then it shouldn't be listed as an asset at all.
The asset and corresponding accumulated depreciation should be reversed out and net difference should be charged to some
profit/loss account.
The payments to the finance company are now expensed as paid.
 
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Hi All,

The above first needs a discussion of applying the five criteria to determine if this qualifies as a finance lease or an operating lease. For either one, an asset will be set up on the lessee’s books.

Hope this helps,

Kat
 
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Then it shouldn't be listed as an asset at all.
The asset and corresponding accumulated depreciation should be reversed out and net difference should be charged to some
profit/loss account.
The payments to the finance company are now expensed as paid.
ASC 842 requires long terms finance leases to be on the balance sheet
 

BIG E

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Why do you believe it's a "current asset" to begin with?
It's a fixed asset - if you know what that is.
 

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