AKM 3: 1 Leasing - Leasing Environment

Summary

This video script provides a comprehensive overview of financial accounting for leasing, focusing on the rules set out by PSAK 30. It explains the different types of leasing—operating lease, finance lease, capital lease, and cross-border lease—and how each affects the accounting treatment for both lessors and lessees. The script also delves into the role of leasing companies, banks, and captive leasing subsidiaries in facilitating leasing transactions. Through clear examples, the script highlights how leasing can be more advantageous than purchasing assets, offering insights into the mechanics of leasing in business investment strategies.

Takeaways

• 😀 Leasing is a financial transaction where a lessor provides the use of assets to a lessee for a specified period, with payment terms outlined in a contract.
• 😀 Leasing is commonly used in businesses to avoid the upfront costs of purchasing expensive equipment, such as aircraft, computers, or satellites.
• 😀 PSAK 30 is the standard governing accounting for leases in Indonesia, and it classifies leases into 'operating leases' and 'finance leases'.
• 😀 In operating leases, leased assets are not reported on the lessee’s balance sheet, and liabilities related to lease obligations are also not reported.
• 😀 In finance leases, both the leased asset and liability are reported on the lessee’s balance sheet, showing the asset as owned, despite being rented.
• 😀 Under new accounting standards, all types of leases must be reported on both the asset and liability sides of the financial statements.
• 😀 Leasing provides flexibility for companies by allowing them to access expensive assets without needing to purchase them outright or take loans.
• 😀 Banks and independent leasing companies are the primary lessors in the leasing market, with banks often offering leasing services through subsidiaries.
• 😀 Captive leasing companies, owned by larger corporations, provide leasing services specifically for the parent company's products and assets.
• 😀 Independent lessors, while less competitive than banks and captive companies, may focus on creative solutions for lessees and could become captive finance companies for other businesses.
• 😀 The different types of leases include capital leases, operating leases, cross-border leases, and specialized forms like leverage and share-steple leases.
• 😀 Capital leases involve financing the purchase of an asset through a lease, where the lessee repays in installments, while operating leases typically involve renting without the lessee assuming ownership responsibilities.

Q & A

What is the main focus of PSAK 30 in relation to leasing?

PSAK 30 regulates the accounting treatment for leasing transactions in Indonesia. It defines leasing as a rental agreement where the lessee uses assets owned by the lessor and lays out the standards for reporting assets and liabilities in leasing agreements.

What are the two main types of leases discussed in the script?

The two main types of leases discussed are 'operating leases' and 'finance leases.' In an operating lease, the asset is not recorded by the lessee as an asset or liability, whereas, in a finance lease, both the asset and liability are recorded on the lessee's balance sheet.

How does leasing benefit companies compared to purchasing assets directly?

Leasing allows companies to avoid the high upfront costs of purchasing expensive assets. It provides an alternative financing option by allowing the use of assets like aircraft or equipment without requiring a large capital investment.

What role does a 'lessee' play in a leasing agreement?

The lessee is the party that uses the asset provided by the lessor. The lessee makes periodic payments to the lessor for the use of the asset, as outlined in the leasing contract.

What is the difference between a 'lessor' and a 'lessee'?

The lessor is the entity that owns the asset and rents it out, while the lessee is the party that rents the asset and makes payments to the lessor for its use.

What is the primary difference between a 'capital lease' and an 'operating lease'?

In a capital lease, the lessee essentially assumes ownership of the asset by recording both the asset and the corresponding liability on their balance sheet. In contrast, an operating lease involves renting the asset, where the lessee does not report the asset or liability.

How does the new accounting standard (IFRS 16) differ from the older accounting standards regarding leases?

Under the new IFRS 16 standard, all leases, regardless of type, must be recorded on the lessee's balance sheet as both an asset and a liability. This is a departure from the previous standards, where operating leases were not reported as assets or liabilities.

What are 'captives leasing companies' and how do they operate?

Captive leasing companies are subsidiaries of large corporations that focus on leasing products related to their parent company's business. These companies have a deeper understanding of the products they lease and often provide favorable financing terms to lessees.

Can banks act as lessors in leasing transactions?

Yes, banks can act as lessors in leasing transactions. Many large banks, such as BCA in Indonesia, provide leasing services through subsidiaries like PT BCA Finance, which focus on leasing operations.

What is a 'cross-border lease'?

A cross-border lease is a type of lease involving parties from different countries. This type of lease is often used for high-value assets such as aircraft and typically involves complex international agreements.