There are two type of leases in accounting explain them and mention the GAAP cri

Question

There are two type of leases in accounting explain them and mention the GAAP criteria to consider the lease as capital “finance” lease explain them in details.

1-Explain the difference between the operating lease and capital lease accounting wise? [Marks 6]

2--How much is the operating lease obligation in total?

3-according to FASB there are three level hierarchy for the fair value measurement technique explain them? Mention example from the balance sheet for asset and liabilities that were measured at fair value for each level if available.

Explanation / Answer

1. Operation lease: In operating lease all the risks and rewards related to asset ownership will remain with the lessor. In terms of accounting, installments of operating lease are expenses and are debited in profit and loss statement

Capital lease: In capital lease the risks and rewards related to ownership of asset are transferred to the lessee. In terms of accounting treatment, unlike operating leases, capital lease is treated like Loan and the payments are treated as assets to be shown in balance sheet

Details regarding 2 and 3 are missing to get answered.

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