Assets and Leasing

probable future economic flowing to the entity

investing CF: - investment in fixed assets

financing CF: + cash inflow (when debt-financed)

purchase price at fair value

+directly attributable cost (transport, installation)

+initial cost of dismantling the asset or restoring the site

+borrowing cost (IAS 23)

borrowing cost during construction can be capitalized, if:

• interest is directly attributable to acquisition, construction or production of a qualified asset

  -> payments for the asset, borrowing costs ocurred, activities for productions are underway

(qualified asset = substantial period to get ready for use or sale)

1. additions, improvements, repairments etc.

   -> expense when occured

   -> capitalized when extending the useful life or increasing the value of the asset

2. depreciation

   
   

impairment test each balance sheet test, if indication that an asset might be impaired

(recoverable amout for goodwill, intangible asset with indefinte useful life and asset not yet available for use -> impairment test each year)

external:

• market value declines

• negative changes in technology, markets, economic or law

• increasing market interest rates

• company stock below book value

Internal:

• obsolence or physical damage

• asset is part in restructuring or hold for dismissal

• worse economic performance than expected

1. cost model (default):

   • amortized costs - accumulated depreciation- impairments

1. Revaluation (IAS 38):

   • choice, but must be for all assets in the category

   • FVOCI (no Recycling) -> depreciation still in P&L

   • recovery of previous income statement write-downs (impairment and depriciation) is recognised in the income statement up to the amount of the old losses

lessor gives a lessee the right to use an asset for agreed period in return for payments

• short term lease (< 12 month)

• leases of low-value assets

initial recognition:

• lease liability = PV of lease payments

• Right-of-use asset = lease liability

subsequent accounting:

1. lease liability:

obligation (t) + interest charge (obligation * rf) - lease payment = obligation (t+1)

-> interest charge wegen unwinding

1. RoU-Asset:

   beginning of year + depreciation - impairment (ggf.) = end of year

interst expense

+depreciation

= sum of interest and depreciation (expensed in P&L)

operating CF:

-interst expense (wenn ausgeklammert von operating lease payments und Zinsen generall in operting CF)

financing CF:

-operating lease payments

Research:

• expense

Development:

• capitalization -> asset, if conditions are fulfilled

research:

• investigation undertaken with the prospect of gaining new scientific or technical knowledge

development:

• application of research findings to design new products / processes / systems before the start of commercial production or use

1. technical feasibility

2. intention of completing the intangible asset

3. ability to sell or use it

4. probable future economic benefit

5. availability of adequate technical and financial resources

6. ability to measure reliably the expenditures