USA Lease accounting

[rroessel]

I've read several articles, but I'm having a hard time finding consistency in how to account for leases. Stuff that will be leased (so far that I know if):

~ company vehicle
~ computer equipment for office(s)
~ equipment necessary to operate the business
~ the building

As far as how long the leases last, I haven't been given that information yet. For the computer equipment, I believe it will be upgraded/exchanged at the end of the lease term and a new lease for the upgraded equipment will start. I believe the same will apply to the vehicle. For other equipment for operations, it hasn't been decided whether that stuff will be leased or bought or a combination of both (if leased, I assume it'll be longer than a year). We don't technically have a building yet, thus no lease terms (we found one that'll work, but it's contingent on bank funding).

What information do I need in order to determine capital vs. operating lease other than what's described above? This is all the information I have at the moment, so I need to know what else I need to figure out. The descriptions confuse me because this each item is necessary for the operation of the business.

EDIT: Am I correct in that anything leased can't be depreciated?

Thanks

 

[bklynboy]

US GAAP has specific guidance on this topic so I am surprised you could not locate anything. Look under ASC 840 for specifics. And leases can be amortized/depreciated. Start by reviewing the accounting guidance and then I can help with any application issues.

If IFRS, look under IAS 17.

 

[rroessel]

I was finally able to get a copy of the lease agreement for the computer equipment that is currently being leased (just one desktop computer tower at this point). Since there is a bargain purchase option of $50, I figure this to be a capital lease (even though there is no intention to purchase the equipment at the end of the lease, the option exists). The lease is for 2 years and monthly payments are $54 ($50 plus $4 in sales tax). Payments are due on the first of the month beginning in February of 2012. That's all the information I have from a numerical standpoint. What else do I need?

Of course this had to be the harder lease to deal with. I didn't latch onto this concept when I was in college and I still don't get it.

 

[rroessel]

I guess my confusion comes from the actual cash transaction vs. the accounting treatment. The actual cash movement is $54/month going from the company to the lessor of the computer. But from what I gather by reading about leases, the accounting treatment isn't nearly that simple.

What am I missing? Can I simply debit the expense and credit cash for $54/month since that is the actual transaction taking place?

 

[CPAInsider]

Is anyone an expert with sale lease-back transactions? One of our locations that we are leasing and deferring the gain per the sales lease-back transaction is being evacuated and now we will be subleasing. Can we now accelerate the gain if we have no liability in terms of lease impairment? (more sublease rental income than lease obligations at the present value)