CH 11
CH 11
CH 11
Chapter 11
Non-Current Liabilities
Financial Accounting
IFRS 4th Edition
Weygandt ● Kimmel ● Kieso
Jan. 1
Candlestick AG
Statement of Financial Position (partial)
Non-current liabilities
Bonds payable €98,000
The issuing company must pay not only the contractual interest
rate over the term of the bonds but also the face value (rather
than the issuance price) at maturity.
Candlestick AG
Statement of Financial Position (partial)
Non-current liabilities
Bonds payable €102,000
Dec. 31
Dec. 31
Lease Liabilities
A lease is a contractual agreement between a lessor and a
lessee.
• Gives lessee the right to use specific property for a
specified period of time
• Lessee makes rental payments over the lease term to the
lessor
Leasing has grown tremendously in popularity. Instead of
borrowing money to buy an airplane, computer, nuclear core, a
company makes periodic payments to lease these assets. The
global leasing-equipment market is over a $900 billion business
Copyright ©2019 John Wiley & Sons, Inc. 38
Lease Liabilities (1 of 2)
Accounting for Lease Arrangements
A lessee recognizes a lease liability and a right-of-use asset
for all leases with a term greater than one year.
Illustration: Gonzalez Construction decides to lease new
equipment. The lease term is four years. Annual payment of
$50,000 is paid in arrear. The implicit effective interest of the
lease is 6%.
PV of future lease payment: PV = $173,255
Right-of-Use Asset 173,255
Lease Liability 173,255
Copyright ©2019 John Wiley & Sons, Inc. 39
Lease Liabilities (2 of 2)
Accounting for Lease Arrangements
• Right-of-use asset is amortised and reported on the
statement of financial position under non-current
assets.
• Lease liability is reported on the statement of financial
position as a liability.
• Portion of lease liability expected to be paid in the
next year is a current liability with the remainder
classified as a non-current liability