In May 2010, the IASB expressed an interest in using a hybrid of two models for lessor accounting. One model is the performance obligation model and one is called the derecognition model. Both of these models are discussed in the discussion paper entitled document "Preliminary Views: Leases, July 17, 2009". The discussion paper is available on the IASB website at www.ifrs.org.
Instructions
(a) Describe the "performance obligation approach" for lessor accounting with respect to its concept, impact on the statement of financial position, and impact on the statement of comprehensive income.
(b) Describe the "derecognition approach" for lessor accounting with respect to its concept, impact on the statement of financial position, and impact on the statement of comprehensive income.
(c) Using the information below, determine what the statement of financial position would look like at the inception of the lease under the two alternatives:
The Lessor has entered into a six-year lease for a piece of machinery. The Lessor carries the machinery on its books at $100,000. The present value of the lease payments to be received for the lease is determined to be $92,900. Show the assets and liabilities that would be shown on the statement of financial position under the two different alternatives.