Current assets are cash and other assets that in the normal course of business are expected to be consumed or converted into cash within one year of the balance sheet date or the n…
What are credit impairment and loss allowance?
Credit impaired financial assets are reported on the balance sheet as a loss allowance that reduces the carrying amount of financial assets measured at amortized cost, contract ass…
What are cash flows from operating activities?
An increase in accounts receivable during the period represents an increase in the amount of revenues that were not received in cash. The amount by which the uncollected accounts…
What are cash and accrual accounting?
Cash basis of accounting involves the recognition of revenue and expenses on a firm’s books when cash is received and paid, respectively, regardless of the period in which the corr…
What are capital requirements for financial institutions?
Credit risk is the dominant source of risk for banks and leasing companies. The amount of capital in relation to risk weighted assets required by regulatory authorities that finan…
What are accrued liabilities and deferred income?
An expense may be incurred in the current period even though no cash payment will be made until a future period. An accrued liability is an obligation incurred in the current acco…
What are accounting principles?
Accounting principles are the standards and practices applied in financial reporting, telling accountants what items to measure and when and how to measure them. They are commonly…
What are accounting principles?
Accounting principles are the standards and practices applied in financial reporting, telling accountants what items to measure and when and how to measure them. They are commonly…
What are a purchase order? What is a bill of sale?
Once the final documents for a lease transaction are prepared and executed (signed) by both the lessor and the lessee, the lease asset is generally acquired using a purchase order….
How will US GAAP accounting for leveraged leases change?
The specialized accounting currently afforded leveraged leases under US GAAP will be eliminated when the new standard on lease accounting goes into effect in 2019. Under the new s…
How is the impairment of a lease accounted for?
An impairment is a permanent reduction in the carrying value of an asset below its fair value (US GAAP) or recoverable amount (IFRS), which occurs when it is probable that the less…
How is return on investment (ROI) measured?
Return on investment (ROI) is considered to be one of the most important analytical tools for evaluating a firm’s profitability, this relating some measure of earnings to some meas…
How is profitability measured?
Profitability is the ability of a company to generate profit. Generally, the greater the firm’s ability to control costs in relation to its sales, the greater its returns. Any ra…
How is liquidity measured?
Working capital, which is current assets in excess of current liabilities, measures a firm’s debt-paying ability and liquidity in absolute terms: Current Assets − Current Liabiliti…
How is leverage measured?
Financial leverage is the amount of debt used by a company relative to the equity in its capital structure. Financial leverage is measured by means of leverage ratios, these encom…
How is expected loss determined?
The quantitative factors and risk components used to determine the expected loss on a credit exposure are probability of default (PD), loss given default (LGD) and exposure at defa…
How is equipment leasing secured?
A lease is not a secured transaction and is not subject to Article 9 of the US Uniform Commercial Code (UCC). Since the lessor of commercial goods, such as equipment, owns the goo…
How is equipment leasing classified?
There is no standard for the definition and classification of equipment. While the White Clarke Group reports on nine segments of equipment finance in its annual US auto and asset…
How is debt-service ability measured?
Any ratio that measures a firm’s ability to meet its debt obligations out of earnings is a coverage ratio. The higher the ratio, the greater the ability of the firm to meet its de…
How is commercial real estate categorized?
The following is one of the various way in which CRE can be categorized: Office – Central business district (CBD) and suburban office buildings; Industrial – Heavy manufacturing, l…
How is cash flow measured?
A cash flow ratio is any ratio that measures the ability of a firm’s cash flow to support its operations, including: Cash-flow-from-operations ratio – Shows the levels of working c…
How is business efficiency measured?
An activity ratio measures the relationship between a firm’s level of operations, usually stated in terms of sales (turnover), and the assets needed to maintain the activity, it in…
How is a real estate lease secured?
Residential or commercial real estate in a lease is real property and a mortgage loan to the owner of leased real estate is secured by that real estate. With the funding of real e…
How is a defaulted lease treated?
True leases and nontax leases receive different treatment in bankruptcy. The US Bankruptcy Code distinguishes between a true lease – in which the lessor retains legal ownership –…
How does assignment secure leasing?
Leases are assigned to lenders to facilitate the orderly and more effective enforcement of the security in the leased property. The lessor assigns to lease funders the rights asso…