Why SSAP 21 Is Not the Answer

Article Abstract:

The new accounting standard concerning accounting for leasing, SSAP 21 is discussed and compared with standards in other countries and the one released by Leaseurope (the association of equipment leasing associations in Europe). Differences between these standards are discussed. Three main issues are pointed out: the basis on which profits are released in lessor's accounts, balance sheet treatment of leased assets for lessee, and balance sheet treatment of leased assets for lessor. A diagram is used to show released assets affect on typical cash flow. It is divided into two periods: investment period with negative cash flow and the surplus period with positive cash flow. This is considered to be inconsistent with the usual method of handling release of profits. Several problems are pointed out, particularly that with this investment period basis of accounting, no earnings would be listed even though there are large amounts of rental outstanding. This is not a 'true and fair' representation. It is concluded that the standard drawn is unsatisfactory because it lacks flexibility in its application to assure a test of 'true and fair'.

Evaluation, Finance, Corporations, Corporate finance

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SSAP 22 (revised) accounting for goodwill (issued December 1984, revised July 1989)

Article Abstract:

The Accounting Standards Committee Statement of Standard Accounting Practice 22 (Revised) Accounting for Goodwill, issued December 1984 and revised July 1989, is presented. The provisions of SSAP 22 contain the nature and meaning of goodwill, the accounting treatment of purchased goodwill, and goodwill in the accounts of individual entities and holding companies and in consolidated accounts. Furthermore, the SSAP defines terms, delineates standard accounting practice, lists the legal requirements in both the UK and the Republic of Ireland, and defines the requirements for compliance with the International Accounting Standard No 22, Accounting for Business Combinations.

Reports, Accounting Standards Committee

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The confusing case of SSAP 12 (revised)

Article Abstract:

Statement of Standard Accounting Practice (SSAP) 12 was published in a revised version in Jan 1987. The SSAP attempts to handle the problem of whether asset depreciation can be avoided if assets wear out. The SSAP defines residual value as the realizable value of an asset at the end of the asset's economic life; and establishes restricted situations in which no depreciation is necessary. Difficulties associated with this proposal are discussed and guidelines provided for companies planning not to depreciate assets.

United Kingdom, Laws, regulations and rules, Accounting and auditing, Depreciation, Great Britain

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