Deferred compensation contracts are arranged for paying employees at a later date. Employers set aside a proportion of deferred liability to compensate employees at retirement. An employer can use different methods to fund deferred compensation contracts. The employees can also participate in a volunteer contribution plan such as an insurance plan to fund their compensation. […]
Accounting for Deferred Compensation Contracts Read More »
A sale-leaseback transaction basically occurs when an owner of an asset sells the asset and immediately leases it back from the buyer. A sale-leaseback option provides a liquidity boost to the company. It also helps a company is managing its debt ratio. These transactions offer several benefits to both parties. The accounting treatment of a
Sale-Leaseback Accounting Under ASC 610 and ASC 842 – US GAAP Rules Read More »
A lease contract can be classified as an operating or finance lease. In some cases, both parties can recognize a lease contract as a direct finance lease as well. US GAAP rules ASC 842 – Leases define five criteria test points to evaluate a lease contract classification. It’s important to note that both the lessor
5 Criteria Test to Distinguish Operating Lease vs Finance Lease under GAAP Rules Read More »
An operating lease refers to a lease contract where the ownership of the asset does not transfer to the lessee. The lessor keeps the ownership rights throughout the lease contract tenure. The lessee does not recognize the leased asset or property as an asset on its balance sheet. However, the lessee needs to account for
Operating Lease Accounting under ASC-842 – US GAAP Read More »
A lessee can make several temporary installments or improvements in an underlying asset. However, at the time of lease contract expiry, these installments must be removed. Asset retirement is an obligation under certain terms and conditions in leasing. US GAAP rules ASC 410 and ASC 842 apply to asset retirement obligation accounting in various cases.
Accounting for Asset Retirement Obligation (ARO) – ASC 410 and ASC 842 Read More »
When two parties enter into a lease contract, they negotiate different terms. One of the common ways lessors use is to offer incentives or allowances to the lessees. A lease incentive reduces the lease liability for the lessee. It should be recognized under ASC 842 if it meets certain criteria. Accounting for the lease incentive
Accounting for Lease Incentives under ASC 842 Read More »
A synthetic lease is a form of sale and leaseback arrangement. A company sells an asset to another company and leases it back immediately. Thus, it retains control of the asset and reduces the tax liability. A synthetic lease can result at different participation levels of the lessee. Both parties need to follow some specific
A spinoff or a spinout is a type of divestment. Large entities create a new entity by selling new stocks of their existing business. This arrangement results in a legal new entity. In some cases, the newly established entity may fulfill certain criteria that can be termed as a reverse spinoff. In that situation, the
Spinoffs and Reverse Spinoffs Read More »
Reverse acquisitions are an alternative method for private companies to go public than an IPO. A private company acquires a public company (often a shell company) by buying the majority of its shares and becomes public. The resulting new entity becomes a public company with a reverse acquisition. The new entity may continue to use
Reverse Acquisitions Read More »
Push-down accounting is applied in business combinations. The accounts books of an acquirer reflect the changes in the books of the acquiree. The target entity reflects the new fair value figures in its financial statement because of the new business combination that emerged after the transaction. Push-down accounting is regulated under the GAAP rules in
Push-Down Accounting Under US GAAP Read More »
