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Essay / Research Paper Abstract
This 4 page paper looks at how and why A leasehold interest might have a value and why it is regarded as a depreciating asset and how this dealt with in terms of valuations. The bibliography cites 3 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TElease3.rtf
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Unformatted sample text from the term paper:
in this way will depend on several factors. For many leases there is an agreement similar to a rental agreement, the leased interests is used by the company for a
set period of time for a set price. As title does not pass, nor do the risks of ownership, the asset remains on the books of the leasing company as
an asset, and is then treated by the business as an operating expense. However, there are certain occasions where a leasehold interest where there is a different scenario. For example,
the leasing of some types of property sees the risk associated with the leasehold interest passed as well as the potential to gain. It would make sense that where there
is the potential to gain as well as the potential to loose that are usually associated with ownership should be treated as a capital asset. The lack of uniformity in
accounting practice and interpretation lead to the development of SSAP 21. To look at this more closely SSAP 21 defines two type
of lease, a finance lease, such as those above, where there is a substantial transfer of the risks and rewards of ownership, and operating leases which are more resembling of
a short term hire purchase agreement. Under the operating lease there is no transfer of risks or rewards associated with ownership under SSAP 21 it is the finance leases that
are capitalised in the accounts (Elliott and Elliott, 1998). The way this is retreated then reflect the position of the accounts. The
asset itself is treated as an owned asset, with the value reflected on the balance sheet. However, this alone may not be seen as a fair reflection of the real
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