IASB and FASB offer new rent bookkeeping tenets and the proprietor of a French chain of fast food outlets is worried about the effect on his organization's accounting reports.
1. Using the Exhibit 1 data, prepare the lessee accounting illustrations Monet requested. How well do the chief accountant's assumed lease characteristics line up with the company's past lease term experience?
2. As a potential BonneSnte investor or creditor, how would you view the liability for future lease payments BonneSante would have to record under the ED's lessee accounting proposals? Is it like regular bank debt? If not, what is it? Would you include at 100 percent of the recognied amount in debt-to-equity ratio?
3. what role does management judgment play in determining the lessee right-of-use asset and lease liability amounts?
4. How might the ED's proposed lessor accounting influence, if at all, the lessor's preferences for particular lease provisions in the BonneSante leases?
5. Compared to your understanding of the IFRS lessee accounting rules in place in August 2010, do you believe the ED proposals represent a significant improvement? Explain.