What Is Original Cost?

The initial direct costs refer to the costs incurred by the leasing parties during the lease negotiation and signing of the lease contract, which can be attributed to the leasing project, mainly including handling fees, legal fees, travel expenses, stamp tax, etc.

Initial direct cost

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Initial direct cost accounting and calculation of unrealized financing income

Article 18 of the Accounting Standards for Business Enterprises No. 21 --- Leasing, which was implemented in 2007, said: "On the lease start date, the lessor shall take the sum of the minimum lease payment and the initial direct cost as the receivable on the lease start date. The booked value of financial lease payments, while recording the unguaranteed residual value; the difference between the sum of the minimum lease payments, initial direct costs, and unguaranteed residual value and the sum of their present values is recognized as unrealized financing income. "I think it is correct The key to calculating unrealized financing income is to properly account for the initial direct costs of the lessor. The confusion and errors in the calculation of unrealized financing income are caused by the error in the initial direct cost accounting of the lessor. To distinguish whether the initial direct costs of the lessor are paid by the lessee, Article 18 of the new lease standard is applicable to the case where the initial direct costs are paid by the lessee, but the initial direct costs are not paid by the lessee. The situation is not applicable.

I. In the case that the lessee is unwilling to bear the initial direct costs of the lessor, the initial direct costs should be treated as expenses; the calculation of unrealized financing income does not need to consider the initial direct costs

Example 22-3 (see pages 450-454) and 22- 5 (see pages 458-460 of the book) as an example. The main relevant information of this example is: On December 28, 20x1, Company A and Company B signed a lease contract. The main terms of the contract are as follows: 1. Lease subject matter: program-controlled production line. 2. Lease start date: January 1, 20x2. 3. Lease period: 36 months from the lease start date. 4. The fair value of the production line of Company B on January 1, 20x2 was 2.6 million yuan. 5. Rental payment method: 1 million yuan of rent will be paid at the end of each year from the start of the lease period. 6. Company B incurred an initial direct cost of 100,000 yuan. Whether the lessee agreed to pay the 100,000 yuan fee was not stated on the title, which was a major negligence and caused great confusion. Judging from the annual rent still at RMB 1 million and the receivables for financing lease still at RMB 3 million, the lessee did not agree to pay the RMB 100,000.

(1) Since this cost cannot be recovered from the lessee, the initial direct cost cannot be added to the receivables of financial leases

Many people have a misunderstanding: the initial direct costs incurred by a lessor, regardless of the amount, whether it is reasonable or not, and whether or not the lessee agrees, can naturally be added to the receivables of financial leases. However, in actual economic life, the initial direct costs incurred by the lessor cannot be added to the financial lease receivable at will if they want to increase it unilaterally, and must be agreed or recognized by the lessee. If the lessee believes that the initial direct costs of the lessor are excessive in expenditure and false waste, and is unwilling to bear them, and only agrees to calculate and pay the financial lease payment due at the fair value of the leased asset, the lessor cannot add the initial direct costs to the Receivables from finance leases. In the above example, if there is a serious waste of the initial direct costs of the lessor, which is 900,000 yuan, can it unilaterally increase the receivables of financial lease receivables to 3.9 million yuan? This is not to pass on its poor management to the lessee. Are you sure? To determine the amount of financial lease receivables, you should not look at the issue in isolation from the lessor alone. You should also link it with the lessee's payable financial lease payments. It should be equal to the lessee's payable financial lease payments. In Example 22-3, the lessee's finance lease payable is 3 million yuan, and the lessor's finance lease receivable should also be 3 million yuan. If the latter is determined to be 3.1 million yuan, of which 100,000 yuan cannot be paid by the lessee, it cannot be realized.

(2) The initial direct expenses cannot be added to the present value of the minimum lease receipts and the net lease investment, and can only be treated as expenses

"Accounting" did not add the initial direct cost of 100,000 yuan to the minimum lease receipt (this is true), but added it to the present value of the minimum lease receipt (260 + 10 = 270). backing. The finance lease receivable is the total lease investment of the lessor. In the case that the lessor's initial direct costs have not been promised by the lessee, the initial direct costs cannot be added to the total lease investment, nor can it be added to the net lease investment. "Accounting" did not add the initial direct cost of 100,000 yuan to the total lease investment, but added it to the net lease investment (260 + 10 = 270), which is also inconsistent.

The initial direct cost cannot be recovered from the lessee, it is not the lessor's investment, it can only be the lessor's expenses, and its account processing can only be expensed and cannot be capitalized. If the lessor is an industrial and commercial enterprise, most of its leases are sales leases. The initial direct costs are related to asset sales. According to international accounting practices, they can be directly included in sales expenses or management expenses. If the lessor is a professional leasing company, the initial direct expenses are relatively small and can be directly included in the current profit and loss. If the amount of expenditure is large, it can be shared during the lease period. The allocation can be straight-line method or sum of years method. Still using the previous example, assume that the lessor Company B spends 10,000 yuan in travel expenses when negotiating with Company A in October 20X1. Records: Borrow: long-term deferred expenses initial direct cost of financing lease 10,000, loan: bank deposit 10000 As of the lease start date on December 28, 20X1, the accumulated initial direct costs to be amortized were 100,000 yuan, which was apportioned over the three-year period using the sum of years method. The amortization amount for the first year is 10000 × (3/6) = 5000 yuan, and the monthly amortization amount = 500/12 = 416.66 yuan. The accounting entries for each month are: Borrow: operating cost or management expense 416.66, loan : Long-term deferred expenses --- the initial direct cost of a financial lease of 416.66. The accounting treatment of "Accounting" Example 22-5 is to debit long-term receivables at the start date of the lease --- 100,000 yuan in finance lease receivables and 100,000 yuan in bank deposits. This kind of account processing is very wrong: first, long-term receivables debit 100,000 yuan to reach 3 million yuan, then it turned out to be 2.9 million yuan? Second, the initial direct costs of 100,000 yuan are all in the lease One-time payment on the start date? In actual economic life, the initial direct costs are gradually incurred during the lease negotiation process.

(3) It is determined that unrealized financing income need not be included in the initial direct costs

"Accounting", pages 458-459, formulate the eighteenth sentence of "Enterprise Accounting Standards No. 21-Leasing" with the formula: Unrealized financing income = [Minimum lease receipts + initial direct expenses + Guaranteed residual value]-[present value of minimum lease receipts + initial direct costs + present value of unguaranteed residual value]. The calculation result is: Unrealized financing income = [300 + 10]-[270 + 10] = 300,000 yuan. This rule and formula is specifically for the case where the initial direct costs are promised to pay by the lessee, and it is not applicable to the case where the initial direct costs are not promised by the lessee. In the latter case, since the initial direct costs cannot be recovered from the lessee, the initial direct costs cannot be added to the finance lease receivables (that is, the total lease investment) and the net investment to be expensed, so the calculation is not Financing income need not consider the initial direct cost at all. The calculation formula and result should be: Unrealized financing income = [Minimum lease receipts + unguaranteed residual value]-[Present value of minimum lease receipts + present value of unguaranteed residual value] = 300-260 = 400,000 yuan. "Accounting" calculation of 300,000 yuan is wrong. Because it added the initial direct cost of 100,000 yuan to the net lease investment, the unrealized financing income was reduced from 400,000 yuan to 300,000 yuan [300- (260 + 10)]. Such accounting is not only theoretically wrong, but it will also reduce the country's business tax revenue.

"Accounting" Example 22-5 The accounting entry on the lease start date should be changed to: Borrow: long-term receivables-receivables from finance leases 3000000; loans: finance lease assets of 2.6 million, unrealized financing income of 400,000. The present value of the minimum lease payment is 1000000 × (P / A, R, 3) = 2600000 (yuan), and the solution is R = 7.51%. The distribution table of unrealized financing income should be changed to Table 1.

2. In the case where the lessee is willing to bear the initial direct costs of the lessor, the initial direct costs should be capitalized. The calculation of unrealized financing income must take into account the initial direct costs

If the lessee believes that the initial direct costs of the lessor are reasonable, necessary, fair, and willing to bear and pay, the accounting treatment is different from the above.

(1) The initial direct cost should be added to the receivables of financial lease and its present value

Because it can be recovered from the lessee's payment, it belongs to the lessor's investment in nature, and is no longer the lessor's expense. The data from the above example is still used. Now assume that the lessee agrees to pay the initial direct cost of 100,000 yuan, then the lessor's receivables from the financial lease = 300 + 10 = 3.1 million yuan. At the same time, the lease payable by the lessee should also be increased to 3.1 million yuan, which must be equal. The net lease investment should also include the initial direct cost, which is 260 + 10 = 2.7 million yuan.

(2) Recalculate lease connotation interest rate and redistribute unrealized financing income based on the new interest rate

Annual rent = 100 + 10/3 = 103.3333 million yuan, 103.3333 × (P / A, R, 3) = 270, solution, R = 7.24%

The accounting entries are: Borrowing: long-term receivables --- 31,800,000 financial lease receivables; loans: 2,600,000 financial lease assets, unrealized financing income of 400,000, and long-term deferred expenses of 100,000. It is not advisable to credit a bank deposit of 100,000 yuan here, because the initial direct cost is not a one-time payment. It is usually not possible to determine whether the lessee is willing to pay, so it is included in the long-term deferred expenses first, and transferred to the finance lease receivable at one time after the lease is paid by the lessee.

(3) To determine the unrealized financing income, it is necessary to consider the initial direct cost

Article 18 of the new leasing standards and Accounting are applicable to this situation based on the formulas listed. Unrealized financing income = [Minimum lease receipts 300 + initial direct expenses 10]-[Minimum lease receipts present value 260 + Initial direct expenses 10] = 310-270 = 400,000 yuan. The initial direct cost is added to the formula first and then decreased. It does not seem to be meaningful. It can be deleted. It seems that the calculation of unrealized financing income can completely ignore the initial direct cost (300-260 = 40). actually not. 1.1000000 × (P / A, R, 3) = 2600000 and 1033333 × (P / A, R, 3) = 2700000 have different lease connotation interest rates, and the amount of financing income realized at the end of each year is also different. 2. If the lessor not only collects the initial direct costs from the lessee, but also charges its interest, and obtains the consent of the lessee, the initial direct costs cannot be completely set aside. In the above example, if the lessee is not only willing to pay the initial direct cost principal of 100,000 yuan, but also to bear the interest of 20,000 yuan, the unrealized financing income = [300 + 12]-[260 + 10] = 420 thousand yuan. Therefore, the formulation of Article 18 of the new leasing standards and the formula in its "Accounting" is not strict, and the first "initial direct cost" should be changed to "final initial direct cost final value".