[Bob Saccomano]

Asset’s useful life? Lease term? Lessor of? Help!

[Gatorbates]

Think about it … if you have a capital lease for 3 years, and the asset's useful life is 5, you would have to depreciate it over the life of the lease; if you depreciated it over 5, and had to “give it back” after 3 years, there'd still be value you paid for but didn't receive.

Licensed Florida CPA:
B: 71, 73, 79
A: 83
R: 78 (expired), 77
F: 74, 74, 80

It's finally freaking over.

[FIFOisbetterthanLIFO]

Depreciation of the asset is amortized over:
1. The economic life of the asset if ownership transfers to lessee at the end of the lease or there is a bargain purchase option
2. The term of the lease if title does not transfer or there is no bargain purchase option

Also, you wouldn't depreciate an operating lease as you don't record an asset on the balance sheet. You are effectively renting.

FAR - Passed (82)
BEC - Passed (76)
AUD - Passed (89)
REG - Passed! (81)
AICPA Ethics

Licensed CPA

[Author]

Replies