Question

What is the arguement for finite uniformity in accounting for leases? Why is finite uniformity difficult to achieve? Explain what the relevant circumstances are in accounting for different types of leases.

Answer 1

What is the arguement for finite uniformity in accounting for leases? Why is finite uniformity difficult to achieve? Explain what the relevant circumstances are in accounting for different types of leases

LEASES are important topic to underdstand in different ways, there are arguments for and against finite uniformity whether accounting for leases or other items. in the present scenario, there is an ongoing debate relating to the oil & gas industry re: finite uniformity in exploration leases. Many companies use finite uniformity in accounting for exploration IF UNSUCCESSFUL but then use other methods if they strike oil/gas.

A workable definition or motivation is -
Finite uniformity: Equates prescribed accounting methods with the relevant circumstances in generally similar situations.

arguments are made on specific ways for specific things. The argument FOR using this philosophy in lease accounting is rather basic. Since the data relates to a lease, normally this indicates a FIXED COST for the investment over a measurable and stated period of time. If the individual or company has numerous leases (equipment, real estate, etc.) all income and expense flows are level and measurable. Hence, there is a good argument for using this philosophy

The total argument reduces to this: some leases are, by analogy, the equivalent of purchases (or sales to a lessor), while others are the equivalent of simple rentals. Finite uniformity is difficult because leases do not naturally fall into these two categories. The criteria (relevant circumstances) have changed over the years, and are discussed at length in the chapter for each standard. In broad terms, they have always been based on the “in-substance-purchase” argument. However, the specific tests have changed often