1. Identify and describe differences between US GAAP and IFRS with respect to accounting and reporting for long-term debt (i.e., bonds, notes payable, and leases). You must identify and describe at least 6 differences to receive full credit.
2. How are bonds and notes the same? How do they differ?
3. List at least three ways that bonds may be taken off the market prior to maturity.
4. ABC Corp. has bonds outstanding during a year in which the market rate of interest has declined. If ABC has elected the fair value option for the bonds, will it report a gain or a loss on the bonds for the year? Explain.
5. What lease disclosure is required of the lessor and lessee?
6. ABC Corporation discloses the following in its 2013 annual report to shareholders:
In 2013, the company entered into three sales-leaseback arrangements with various financial institutions. Under the first arrangement, truck assembly machinery with a net book value of $58 million was old for $60 million and leased back under an eight-year operating lease agreement. Under the second arrangement, engine manufacturing equipment with a net book value of $261 million was sold for $260 million and leased back under an 11.5-yevar operating lease agreement. The third arrangement consisted of additional manufacturing equipment with a net book value of $62 million that was sold for $65 million and leased back under a 10-year operating lease arrangement. The gain on these transactions was deferred and is being amortized over the terms of the lease agreements.
Discuss the most likely reasons for these three transactions, and explain what is meant by the last sentences of the disclosure.