[thebigguy1992]

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?

[Spartan15]

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
REG - 92
FAR -

[thebigguy1992]

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

[Spartan15]

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

AUD - 99
BEC - 96
REG - 92
FAR -

[thebigguy1992]

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?

[Spartans92]

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

BEC- PASS

[Spartan15]

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
BEC - 96
REG - 92
FAR -

[Spartans92]

@Spartan15, you from Michigan?

BEC- PASS

[Spartan15]

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

AUD - 99
BEC - 96
REG - 92
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[Demha]

Spartans, I'm from Michigan too. GO BLUE! 😉

Gleim baby!
Grand Valley State University - '15
Accounting & Finance
FAR - 2nd Window '16

[Excel14]

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?

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

CIA, CGAP, CFE

[Spartans92]

Haha Go White!!! Spartans are everywhere. 🙂

BEC- PASS

[maki]

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
REG 02/27/16 79
BEC 04/16 84
FAR 06/04

[Excel14]

@maki,

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

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

CIA, CGAP, CFE

[Anonymous]

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.

[Author]

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