Accounting for Managers: Financial Reporting and Leases

This report, titled "Accounting for Managers," delves into the crucial aspects of financial accounting and reporting, with a specific focus on lease accounting. It examines key considerations for Company A, including the definition of a lease, which encompasses agreements for the use of property, plant, and equipment over a specified period. The report outlines the implementation of financial accounting standards, particularly concerning related-party lease transactions and the roles of lessees and lessors. It addresses the accounting and reporting requirements for lessees, covering operating leases, disclosure requirements, and the treatment of leases between unrelated parties. Furthermore, the report discusses the accounting of lessees under the Financial Accounting Standards Board (FASB) guidelines, emphasizing the classification and accounting treatment of leases based on their nature. The document also references relevant literature, including the works of Chiu et al. (2016), Donelson et al. (2016), Evans et al. (2014), Gordon and Hsu (2017), Hoskin et al. (2014), and Hoyle et al. (2015).

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
Name of the Student
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Table of Contents
Key Accounting Considerations:...............................................................................................2
Implementing the standards of Financial Accounting and Reporting:.......................................2
Accounting and Reporting by Lessees:......................................................................................2
Disclosure:..................................................................................................................................3
Leases between the unrelated parties:........................................................................................3
Accounting of lessee under the FASB:......................................................................................4
Reference List:...........................................................................................................................5

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Key Accounting Considerations:
This statement provides the standards of financial accounting and reporting for
Company A with special emphasis on the key accounting considerations relating to the
acquirement of Land and Lease undertaken by the company (Hoskin, Fizzell and Cherry
2014). For the purpose of this report lease can be defined as an contract that conveys the right
to make use of the property plant and equipment for the assured period of time. It complies
the agreements even though not nominally recognized as the leases however meet the above
definition. Payments that are made on behalf of the lessee symbolizes enticement which must
be measured in the form of reductions of leasing expense by the lessee and the reduction of
any form of leasing proceeds by the lessor greater than the expression of the lease.
Implementing the standards of Financial Accounting and Reporting:
Related parties in the lease transactions:
Company A and BPI possess the ability to implement significant amount of influence
over reporting and the monetary policies of the associated parties (Hoyle, Schaefer and
Doupnik 2015). For the purpose of this definition, company A must obtain in writing and
signed by the interested parties associated with the contract and must specially lay down the
principle term of transactions.
Accounting and Reporting by Lessees:
Company might take the possession or it can acquire the control of the agreement property
prior to the commencement of operations or by making the rental payments under the terms
of the lease. During the period, the lessee has the right of using the leased possessions and
performs with the objective of lease asset. Following the completion of the construction,

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Company A being the lessee can start the operations and shall be required to make the rental
payments in agreement with the conditions of the lease. As company A is the end user of the
lease it will be prevented from any form of operating lease of rent under the operating lease
in the form of cost of the constructed asset. The operating lease that is incurred by Company
A shall be included in the construction period and will be identified as the rental expense.
Disclosure:
Acquisition of lease for Company A represents operating lease with the gross amount
of the assets recorded under the operating lease by presenting the date of the asset acquired
under the major classes in respect of the nature or function. The information can be combined
by Company A with the comparable amount of owned assets (Gordon and Hsu 2017). For
Company A it is evident that land is the solitary piece of property that is leased by the
company therefore, Company A is under obligations to record the lease in the form of
operating lease or otherwise in the form of operating lease. Concerning the accounting
treatment, the leased property by Company A will be incorporated with the property plant
and equipment in the statement of financial position. The asset will be held for depreciation
in terms of the lessor’s nominal depreciation strategy and in the balance sheet Company A is
required to deduct the accumulated depreciation from the investment made in the leased
property in the balance sheet.
Leases between the unrelated parties:
As far as the separate financial statements are considered the classification and the
accounting of the lease from the unrelated parties shall be accounted and classified in the
distinct financial statement. The estimated residual worth of the leased assets by Company A
forms an elite part of the guaranteed provided by the third party unrelated to the lessor. The
payment that company A is under obligations to make will be in relation with that of the

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leased property. Rental on the operating lease for the Company A must be charged to the
expense over the term of lease when it becomes payable.
Accounting of lessee under the FASB:
Given the circumstances that the lease was in the nature of operating lease, the
obligation and the asset represents that the original lease shall be removed by the Company A
from the accounts, profits and loss will be identified for the differences stated (Donelson,
McInnis and Mergenthaler 2016). The new lessee shall be classified by the company A in
agreement with the criteria of paragraph 7 and will be accounted for it consequently. In
accordance with the AASB guideline any form of estimated residual value and all the other
type of relevant information assumptions that affects the estimated total net income from the
lease should be reviewed by the company at least once in the year.

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Reference List:
Chiu, P.C., Pincus, M., Zhou, K. and PwC, L., 2016. Do Industry Differences Matter–IFRS
Versus US GAAP?.
Donelson, D.C., McInnis, J. and Mergenthaler, R.D., 2016. Explaining Rules‐Based
Characteristics in US GAAP: Theories and Evidence. Journal of Accounting Research, 54(3),
pp.827-861.
Evans, M.E., Houston, R.W., Peters, M.F. and Pratt, J.H., 2014. Reporting regulatory
environments and earnings management: US and non-US firms using US GAAP or
IFRS. The Accounting Review, 90(5), pp.1969-1994.
Gordon, E.A. and Hsu, H.T., 2017. Tangible Long-Lived Asset Impairments and Future
Operating Cash Flows under US GAAP and IFRS. The Accounting Review.
Hoskin, R.E., Fizzell, M.R. and Cherry, D.C., 2014. Financial Accounting: a user
perspective. Wiley Global Education.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.