Deprecating over lease term or useful life?

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    Topic
  • #202342
    thebigguy1992
    Participant

    Let me get this straight – if there is a BPO or a transfer of ownership, you depreciate over the useful life. If there is not those two things, you depreciate over the lesser of the lease term of the useful life, correct?

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Viewing 14 replies - 1 through 14 (of 14 total)
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  • #779158
    Spartan15
    Participant

    Correct.

    Using the Becker mnemonic I just remember that….

    O (ownership transfer) and W (Written BPO) = Depreciate over Life

    N (90% FMV) and S (75% economic life) = Depreciate over lease

    AUD - 99
    BEC - 96
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    #779159
    thebigguy1992
    Participant

    for the second part you said transfer over lease. isn't over the lesser of lease or useful life though?

    BEC - 79
    FAR - 62,73,76
    AUD - 70, 88
    REG - 83
    #779160
    Spartan15
    Participant

    Yeah my bad I forget to put that but I believe you are correct.

    AUD - 99
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    #779161
    thebigguy1992
    Participant

    ok also this is on a different topic but the new thing we need to know for bond issuance costs is that they reduce the carrying amount of the liability. do you or anyone know if we have to know the fact that the old rule is it was recorded as an asset and amortized or can we just completely forget about that and just remember the new rule?

    BEC - 79
    FAR - 62,73,76
    AUD - 70, 88
    REG - 83
    #779162
    Spartans92
    Participant

    I think when it comes to leases Roger does it best! TT, BPO, 75 and 90!

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    3 down 1 more to go. BEC is on the Line šŸ™

    BEC- PASS

    #779163
    Spartan15
    Participant

    I never saw anything about that and in Becker it explains that bond issuance costs just reduce the carrying amount of the liability. I personally wouldn't worry about the old rule.

    AUD - 99
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    REG - 92
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    #779164
    Spartans92
    Participant

    @Spartan15, you from Michigan?

    BEC - 76
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    3 down 1 more to go. BEC is on the Line šŸ™

    BEC- PASS

    #779165
    Spartan15
    Participant

    I am, looks like you are as well. Go Green!

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    #779166
    Demha
    Participant

    Spartans, I'm from Michigan too. GO BLUE! šŸ˜‰

    Using Gleim w/ Ninja Notes and Another71.com Forum Secrets

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    Grand Valley State University - '15
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    #779167
    Excel14
    Participant

    Wait a minute. In the newest addition of my Gleim book, it says the bond issuance costs are dducted from the carrying amount of the bond, but it also says right after that, they are amortized over the life of the bond, using the effective interest method. Some of your posts read like we deduct it from the bond face, but no amortization takes place. Where are you reading that, if in fact that was what you are saying?

    Also, I just noticed that in the Gleim book, in terms of leases it says for Crtierion #3 or Criterion #4, you amortize over the lease term. There is no mention of the “lesser of the lease term or useful life”. Man, what is going on here with these two issues. Which way is right, for both leases and bond issue costs?

    What do they call an accounting person, who only managed a 75 on all four parts of the CPA exam....you got it, CPA!!!

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    CIA, CGAP, CFE

    #779168
    Spartans92
    Participant

    Haha Go White!!! Spartans are everywhere. šŸ™‚

    BEC - 76
    REG- 67, 85
    AUD-63, 74, 80!!
    FAR-65, 62, 57, 79

    3 down 1 more to go. BEC is on the Line šŸ™

    BEC- PASS

    #779169
    maki
    Participant

    BIC are amortized and you would depreciate over lease term with criterion 3 or 4 unless it's in the last 25% of the asset's economic life in which case it wouldn't qualify as a capital lease.

    Roger CPA

    AUD 02/01/16 91
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    #779170
    Excel14
    Participant

    @maki,

    Okay, I thought so, but the post above doesn't read like it is the same thing.

    What do they call an accounting person, who only managed a 75 on all four parts of the CPA exam....you got it, CPA!!!

    BEC (2/28/16) ----- 78
    FAR (09/10/16)-----
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    REG

    CIA, CGAP, CFE

    #779171
    Anonymous
    Inactive

    I never noticed how close in spelling deprecate and depreciate are.

    Non-accountants frequently deprecate depreciation, but that's just because they don't understand it.

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