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LEASES

LEASES. Definition Finance or Operating – based on risks & rewards of ownership LESSEES Asset and Liability & depreciation lease payment split between cap and interest LESSORS No asset in balance sheet Receivable in balance sheet lease receipt split between cap and interest.

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LEASES

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  1. LEASES • Definition • Finance or Operating – based on risks & rewards of ownership LESSEES • Asset and Liability & depreciation • lease payment split between cap and interest LESSORS • No asset in balance sheet • Receivable in balance sheet • lease receipt split between cap and interest Other accounting issues

  2. FINANCIAL INSTRUMENTS • Cash and bank balances • Receivables • Equity (shares) & debt instruments (bonds) • Loans (from banks etc.) • Payables • Derivatives • Forward Rate Agreements, Forward Exchange Contracts, Swaps, Options Other accounting issues

  3. FINANCIAL INSTRUMENTS MAIN ACCOUNTING ISSUES • All shares and derivatives at fair value on Balance Sheet • Other instruments may be at fair value on Balance Sheet • All gains/losses on derivatives and trading instruments to Profit and Loss • Non trading shares (available for sale) gains and losses go to equity (via OCI) • Changing in 2015! Other accounting issues

  4. Other accounting issues

  5. FOREIGN CURRENCIES FUNCTIONAL CURRENCY = Currency of primary economic environment in which entity operates PRIMARY INDICATORS • Sales price for goods and services • Country that determines sales price • Price of labour, materials, etc of providing goods & services SECONDARY INDICATORS • Funds from financing activities • Receipts from operating activities Other accounting issues

  6. FOREIGN CURRENCIES TRANSLATION INTO FUNCTIONAL CURRENCY • Initially at spot • Subsequently • Monetary items at closing rate • Non-monetary (historical cost) at rate at date of transaction • Exchange differences to profit or loss • This applies to transactions and other group companies Other accounting issues

  7. FOREIGN CURRENCIES PRESENTATION CURRENCY = Currency in which the financial statements are presented (Financial Statements may be presented in any currency) TRANSLATION INTO PRESENTATION CURRENCY • Assets and liabilities at closing rate • Income and expenses at date of transaction • Exchange differences recognised in equity (FCTR) Other accounting issues

  8. OTHER ISSUES Segmental reporting Related parties Share based payments Deferred tax Other accounting issues

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