CLFP EXAM - Financial and Tax Accounting for Leases Latest Exam Guide | Questions With Verified Answers 2024

CLFP EXAM - Financial and Tax Accounting for Leases Latest Exam Guide | Questions With Verified Answers 2024 What is a primary goal of the accounting profession? Correct Answer Consistent treatment of like transactions to allow clarity in presentation and consistency in interpretation of financial statements prepared by various individuals or entities. How did APB (Accounting Principals Board) fail? Correct Answer Created Opinion #5 (Reporting of Leases in Financial Statements of Lessees) and Opinion #7 (Accounting for Leases in Financial Statements for Lessors) that ha different opinions and left lessors & lessees with conflicting rules. What was FASB 13? Correct Answer Financial Accounting Standards Board issued "Accounting for Leases" which was a comprehensive set of standards to be followed by lessors and lessees in accounting lease transactions. What is Accounting Standards Codification? Correct Answer Approved by FASB in 7/2009, a single source of of authoritative US accounting and reporting standards What now governs lease accounting? Correct Answer ASC 840 What is a Bargain Renewal Option? Correct Answer a provision allowing lessee, at his option, to renew the lease for a rental sufficiently lower than the expected fair value of the property at the date the option becomes excercisable. It is reasonably assured the renewal option will be exercised. What is a Bargain Purchase Option? Correct Answer a provision allowing lessee, at his option, to purchase the property for a price sufficiently lower than the expected fair market value of the property at the date the option becomes excercisable. It is reasonably assured the purchase option will be exercised. What are Contingent Rentals? Correct Answer Rentals that represent increases or decreases in the lease payments made that result from changes in the factors on which lease payments are based occurring subsequent to the inception of the lease. Increases may occur due to increased construction cost or indexed interest rates. What is Economical Useful Life of Leased Property? Correct Answer At the inception of the the lease, the estimated remaining period during which the property is expected to be economically usable for its intended purpose by one or more users. This may be impacted by usage, technology and deterioration. Independent of lease term. What is Residual Value of Leased Property? Correct Answer Estimated fair value of the lease property at the end of the lease. What is Executory Costs? Correct Answer The costs such as insurance, maintenance and taxes incurred for the leased property, whether paid by lessor or lessee. Also include costs paid by lessee as guarantor. What is Value of Leased Property? Correct Answer The price at which the property could be sold at an arm's length transaction by unrelated parties. 1.) normal selling price, net volume discounts, for a lessor who manufacturer/dealer 2.) Cost, net volume discounts for a lessor that is note a manufacturer or dealer. What is Implicit Interest Rate? Correct Answer The discount rate that, when applied to the minimum lease payments cause the aggregate present value at the beginning of the lease term to be equal to the fair value of the leased property to the lessor at the inception of the lease. What is Inception of the Lease? Correct Answer The date lease commitment. What is Incremental Borrowing Rate? Correct Answer The rate, at the inception of the lease, the lessee would have incurred to borrow, under like terms, the funds necessary to purchase the