Finance Lease Liabilities

Code: 2212
👁 Views: 130

Account Information

Financial Statement Statement of Financial Position
Normal Balance Credit

Definition

Finance lease obligations due after more than one year

Common Journal Entries

Record new finance lease

Dr. Right of Use Asset
Cr. Finance Lease Liability

Pay finance lease installment

Dr. Finance Lease Liability
Dr. Interest Expense
Cr. Bank Account

Depreciate right of use asset

Dr. Depreciation Expense
Cr. Accumulated Depreciation ROU

Terminate finance lease

Dr. Finance Lease Liability
Cr. Right of Use Asset

Record new finance lease

Dr. Right of Use Asset
Cr. Finance Lease Liability

Pay finance lease installment

Dr. Finance Lease Liability
Dr. Interest Expense
Cr. Bank Account

Depreciate right of use asset

Dr. Depreciation Expense
Cr. Accumulated Depreciation ROU

Terminate finance lease

Dr. Finance Lease Liability
Cr. Right of Use Asset

📐 IFRS vs US GAAP Accounting Treatment

IFRS IFRS 16 Leases
US GAAP ASC 842 Leases
⚠️ Key Difference Between IFRS and US GAAP

IFRS single lessee model; GAAP retains finance/operating lease distinction

❓ Frequently Asked Questions

Q: What are finance lease liabilities?

A: Obligations under long-term finance leases that effectively transfer ownership to the lessee, measured at the present value of lease payments.