Intermediate Accounting
Thomas H. Beechy
Schulich School of
Business,
York University
Joan E. D. Conrod
Faculty of Management
Dalhousie University
Powerpoint slides by:
Michael L. Hockenstein  Commerce Department • Vanier College
Copyright © 2003 McGraw-Hill Ryerson Limited, Canada
Accounting for Leases by Lessees
Chapter 18
18-2
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Definition of a Lease
 Lease:

the conveyance, by a lessor to a
lessee, of the rights to use a tangible asset
usually for a specified period of time in return for
rent
The lease specifies the terms under which the
lessee has the right to use the owner's property
and the compensation to be paid to the lessor in
exchange
18-3
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Why Lease? The Leasing Continuum


A short-term lease is used to obtain temporary
use of an asset without having to buy it
This is appropriate when there is no long-term
need for an asset, or when the lessee’s business
is volatile and there is not a constant need for a
certain type of asset
 Operating lease: a short-term lease that
provides the lessee with temporary use of an asset
18-4
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Why Lease? The Leasing Continuum
(cont.)
 The longer the lease term, the lower the daily

rental cost
A lease that conveys substantially all of the
risks and rewards of ownership from the lessor
to the lessee is, in substance, a means of
financing acquisition of the asset and is called
a capital lease
18-5
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Operating Leases


An operating lease is one that gives the
lessee the right to use the asset for only a
relatively short period of its useful life,
such as renting a car or truck for a day, a
month, or a year
The lessee makes periodic payments to the
lessor that are accounted for as normal
expense items by the lessee
18-6
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Operating Leases (cont.)
 The lessor credits the payments to an income

account such as leasing revenue
A short-term is a relative phrase when it
comes to asset leasing; a 10-year lease is
short term when it applies to leasing a building
or a part of a building whose useful life may be
60 or 80 years
18-7
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Guidelines for Defining Capital Leases
 The CICA Handbook states that, normally, a lease
should be assumed to transfer substantially all of the
risks and benefits of ownership to the lessee when
at least one of the following conditions is present at
the inception of the lease:
 there is reasonable assurance that the lessee will
obtain ownership of the leased property at the
end of the lease term
- this would occur if the lease provides for
automatic transfer of title to the lessee at the
end of the lease, or if the lessee is entitled to
exercise a bargain purchase option
18-8
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Guidelines for Defining Capital Leases
(cont.)
 the lessee will receive substantially all of the
economic benefits expected to be derived
through use of the leased property
- since assets are most productive in the earlier
years of their lives, this condition is presumed
to be satisfied if the lease term is at least 75%
of the asset’s economic life
18-9
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Guidelines for Defining Capital Leases
(cont.)
 the lessor will be assured of recovering the
investment in the leased property, plus a return
on the investment, over the lease term
- this condition is presumed to be satisfied if
the present value of the minimum net lease
payments is equal to at least 90% of the fair
value of the asset at the inception of the
lease
18-10
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Definitions
 A bargain purchase option exists when there is a

stated or determinable price given in the lease that is
sufficiently lower than the expected fair value of the
leased asset at the option’s exercise date to make it
likely that the lessee will exercise the option
The lease term includes:
 all terms prior to the exercise date of a bargain
purchase option
 all bargain renewal terms
 all renewal terms at the lessor’s option
18-11
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Definitions
 Bargain renewal terms: periods for which the
lessee has the option of extending the lease at lease
payments that are substantially less than would
normally be expected for an asset of that age and type
 Minimum net lease payments: all payments over
the lease term, as described above, net of operating or
executory costs that are implicitly included in the lease
payments, plus any guaranteed residual value
 Guaranteed residual value: the amount that the
lessee agrees to assure that the lessor can get for the
asset by selling it to a third party at the end of the
lease term
18-12
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Definitions (cont.)
 Incremental borrowing rate (IBR):
the
interest rate that the lessee would have to pay if
they obtained financing through the bank (or other
credit sources) to buy the asset
 Implicit lease interest rate: the interest rate
that discounts the minimum net lease payments to
equal the fair market value of the leased property at
the beginning of the lease
18-13
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of a Capital Lease
 Assume that Rosie Inc. enters into a lease for
equipment. The terms of the lease and the
characteristics of the equipment are as follows:
 the current purchase price of the equipment is
$700,000 and the expected useful economic life
of the equipment is 20 years
 the initial lease term is eight years; Rosie cannot
cancel the lease during this period
 lease payments during the initial lease term are
$100,000 per year
18-14
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of a Capital Lease (cont.)
 these payments include property taxes and
insurance costs that are estimated to be $5,000
per year
 at the end of the initial lease term, Rosie can
elect to renew the lease for two successive fouryear terms at an annual rental of $40,000 per
year, including estimated property taxes and
insurance of $4,000 per year
 eight-year old equipment of this type has a fair
value of approximately $350,000, and can be
leased for about $54,000 per year, net
18-15
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of a Capital Lease (cont.)
 these payments include property taxes and
insurance costs that are estimated to be
$5,000 per year
 if Rosie Inc. does not exercise the renewal
options, the asset reverts to the lessor and will
be physically removed from Rosie’s premises
 following the second renewal term (that is,
after 16 years), the asset will automatically
revert to the lessor, although the lessor may
elect not to physically remove the asset
18-16
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of a Capital Lease (cont.)
 all lease payments are due at the beginning of
each lease year
 if Rosie went to the company’s friendly local bank
manager, the company would be able to borrow
the money to buy the equipment at an interest
rate of 10%
 Rosie Inc. does not know the lessor’s interest
rate implicit in the lease
18-17
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of a Capital Lease (cont.)

The terms of the lease can be compared to the
three guidelines for determining whether
substantially all of the risks and rewards of
ownership have been transferred to the lessee:
 there is no bargain purchase option and no
automatic reversion of the asset to the lessee at
the end of the lease
- therefore, there appears not to be reasonable
assurance that the lessee will obtain
ownership of the asset at the end of the lease
term
18-18
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of a Capital Lease (cont.)
 the lease term, including bargain renewal
terms, is 16 years. This lease term constitutes
80% of the asset’s estimated 20-year useful life
- therefore, it appears that Rosie Inc. will have
the use of the asset over 80% of its useful
life.
18-19
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of a Capital Lease (cont.)

the discounted present value of the minimum net lease
payments over the 16-year lease term at Rosie Inc.’s
IBR of 10% is $656,056:
 PV = $95,000 (P/A due, 10%, 8) + $36,000 (P/A
due, 10%, 8) (P/F, 10%, 8)
 PV = $557,500 + $98,556
 PV = $656,056
18-20
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Informal Criterion for Capital Leases
 In order to fully realize the tax advantages that



often are the driving force behind capital leases, a
lessor must qualify as a lessor under the income
tax regulations
Lessor must derive at least 90% of its revenues
from lease transactions
Any company that meets this criterion is not an
operating company; it is a financial intermediary
A capital lease is assumed if the lease term is for
70% of the asset’s useful life and the present value
of the minimum net lease payments is 85% of the
fair value of the asset
18-21
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Informal Criterion For Capital Leases
(cont.)


If the tax advantages of the lease are substantial,
the reduced lease payments could result in a lease
contract that easily fails to meet the capital lease
criteria.
Thus the emphasis of the CICA Handbook on the
substance of the transaction must remain
paramount, regardless of whether any of the three
capital lease criteria are present
18-22
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Advantages of Long-Term Leases
 Off-Balance Sheet Financing: the acquisition




of assets through capital leases permitted lessees to
obtain the full and unfettered use of assets without
having to report the assets on their balance sheets
100% Financing
Flexibility
Protection from Interest Rate Changes
Transfer of Income Tax Benefits
 “...the driving force behind the bulk of direct
financing leases.”
18-23
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Accounting Approach for Capital Leases


If a long-term lease qualifies as a capital lease for
accounting purposes, the general approach is to
record the asset on the books of the lessee as though
it had been purchased and financed by instalment
debt
The accounting is as follows:
 the present value of the lease payments is
determined by using
-
The lower of the lessee’s IBR or the lessor’s implicit rate,
if known, and
Net lease payments for the initial term, plus net lease
payments for any bargain renewal terms, plus any renewal
terms at the lessor’s option, plus any guaranteed residual
value or any bargain purchase price
18-24
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration--Basic Example


Lessee Ltd. wishes to acquire equipment that has
an expected economic life of five years and a fair
value of $55,000. Instead of buying the asset
outright, the company enters into a lease with a
bank’s leasing subsidiary
The terms of the lease are as follows:
 the initial lease term is three years.
 the lease begins on 2 January 20X2
 payments over the initial lease term are $22,000
per year, payable at the end of each lease year
(that is, on 31 December)
18-25
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration--Basic Example
(cont.)
 lease payments include insurance costs that
are estimated to be $2,000 per year for the
three years of the initial lease term
 at the end of the initial lease term, the lease is
renewable for another two years at Lessee
Ltd.’s option for $6,000 per year, including
insurance. The cost of insurance in Year 4 and
thereafter is estimated to be $1,000 per year.
The normal rental cost of three-year old
equipment of this type is almost $10,000 per
year
18-26
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration--Basic Example
(cont.)
 there is no guaranteed residual value, and the
asset reverts to the lessor at the end of the
lease
 if Lessee Ltd. had purchased the asset, the
company would have drawn on its bank line of
credit, which bears interest at 12% per annum
18-27
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration--Basic Example
(cont.)

In this example, the important elements for analysis
are as follows:
 the lease term is five years: the initial lease term
of three years plus the bargain renewal term of
two years
 the minimum net lease payments are $20,000
for each of the first three years and $5,000 per
year for the fourth and fifth years (that is, the
estimated insurance cost must be subtracted or
netted out to determine the net lease payments)
 Lessee Ltd.’s incremental borrowing rate is 12%
per annum)
18-28
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration--Basic Example
(cont.)
 Under the guidelines provided by the CICA
Handbook, this lease is a capital lease for the
following reasons:
 the lease term is five years, which exceeds 75%
of the equipment’s estimated five year
economic life
18-29
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration--Basic Example
(cont.)

 the present value of the minimum net lease
payments at the lessee’s IBR is $54,051, which
exceeds 90% of the $55,000 fair value of the
equipment:
- PV = $20,000 (P/A, 12%, 3) + $5,000 (P/A,
12%, 2) (P/F, 12%, 3)
- PV = $48,037 + $6,014
- PV = $54,051
To clinch matters, the lessor is a financial
intermediary whose business is the financing of
assets through direct financing leases
18-30
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Accounting for the Lease


The principal amount outstanding during the year
20X2 is the full present value of $54,051. In general
journal form, the lease would be recorded on the
books on 2 January 20X2 as follows:
 Asset under capital lease $54,051
 Lease liability
$54,051
The entry to record the accrued interest is:
 Interest expense
$6,486
 Lease liability
$6,486
18-31
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Accounting for the Lease (cont.)


When the cash payment is made, the entry is:
 Insurance expense $2,000
 Lease liability
$20,000
 Cash
$22,000
Since the cash payment includes an implicit
amount for insurance, the estimated insurance
amount must be debited separately to an
expense account
18-32
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Exhibit 18-1
18-33
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Future Income Taxes
 If a lessee enters into a lease contract, Canada


Customs and Revenue Agency normally will
view the appropriate deduction for tax purposes
to be the amount of lease payments made
during the tax year
The fact that a lease may be accounted for as a
capital lease is of no interest to the tax people
Leases that transfer title to the lessee at the end
of the lease term will be viewed by Canada
Customs and Revenue Agency as instalment
sales contracts in substance, and will be taxed
as a purchase
18-34
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Future Income Taxes (cont.)



If a lease is taxed as a purchase, then the lessee
will deduct imputed interest expense and will be
eligible to deduct CCA
Therefore, leases are seldom structured in a way
that invites taxation as a purchase
In most instances, a lease that is reported by the
lessee as a capital lease will be taxed as an
operating lease
18-35
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Future Income Taxes (cont.)


This difference in treatment will give rise to a
temporary difference
The future tax impact of the temporary difference
relating to a capital lease is credited to the longterm future income tax balance
18-36
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration–
Extended Example
 Assume that Lessee Ltd. needs to acquire

equipment that has a fair value purchase price of
$55,000
The company elects to acquire this equipment
through a lease from their bank’s leasing
subsidiary. The terms of the lease are as follows:
 the initial lease term is three years and the
lease begins on 1 April 20x2
 payments over the initial lease term are $20,500
per year, payable at the beginning of each lease
year (that is, on 1 April)
18-37
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration–
Extended Example (cont.)
 lease payments include insurance costs that are
estimated to be $2,000 per year for the three years
of the initial lease term
 at the end of the initial lease term, the lease is
renewable for another two years at Lessee Ltd.’s
option for $4,200 per year, including insurance
 the cost of insurance in Year 4 and thereafter is
estimated to be $1,000 per year
 the normal rental cost of three-year old equipment
of this type is almost $10,000 per year
18-38
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration–
Extended Example (cont.)
 the asset reverts to the lessor at the end of the
lease; there is no guaranteed residual value
 if Lessee Ltd. had purchased the asset, the
company would have drawn on its bank line of
credit, which bears interest at 12% per annum
 Lessee Ltd.’s fiscal year ends on 31 December
18-39

Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration–
Extended Example (cont.)
 In this extended example, the important elements for
analysis are as follows:
 the lease term is still five years: the initial lease term
of three years plus the bargain renewal term of two
years
 the minimum net lease payments are now $18,500
for each of the first three years and $3,200 per year
for the fourth and fifth years (as in the earlier
example, the estimated insurance cost must be
subtracted or netted out to determine the net lease
payments)
 Lessee Ltd.’s incremental borrowing rate is 12%
p.a.
18-40
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Capital Lease Illustration–
Extended Example (cont.)


The present value of the minimum net lease payments,
at 12%, is $54,077:
 PV = $18,500 (P/A due, 12%, 3) + $3,200 (P/A due,
12%, 2) (P/F, 12%, 3)
 PV = $49,766 + $4,311
 PV = $54,077
The annual lease payments are less than in the earlier
example, but the present value is almost the same
because the payments now are at the beginning of
each lease year instead of at the end
18-41
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Accounting for the Lease
 On 1 April 20X2, Lessee Ltd. will record its

acquisition of the asset and the related
obligation as follows:
Asset under capital lease $54,077
Lease liability
$54,077
Simultaneously, a cheque for $20,500 will be
issued to the lessor:
Insurance expense
$2,000
Lease liability
$18,500
Cash
$20,500
18-42
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Accounting for the Lease (cont.)


Since the first payment is made at the
inception of the lease, the principal balance
outstanding during the first lease year is only
$35,577: $54,077  $18,500
The interest expense over the life of the
lease clearly will be less than in the earlier
example because the outstanding balance is
always less
18-43
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Accounting for the Lease (cont.)


At the end of Lessee Ltd.’s fiscal year, the accounts
must be adjusted to record accrued interest, as well
as to record asset amortization and (if material) to
allocate the insurance expense
The adjusting entries on 31 December 20X2 will
appear as follows, assuming that the company
follows a policy of allocating depreciation on a
monthly basis:
18-44
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Accounting for the Lease (cont.)
Interest expense
$3,202
Lease liability
$3,202
[$35,577  12%  9/12 year = $3,201.93]
Amortization expense
$8,112
Accumulated amortization $8,112
[$54,077  5 years  9/12 year = $8,111.55]
Prepaid expenses
Insurance expense
[$2,000  3/12 year]
$500
$500
18-45
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Sale and Leaseback
 It is not unusual for a company to take an asset


that it owns and enter into a transaction with
another party in which the asset is
simultaneously sold and leased back
The asset is thereby converted from an owned
asset to a leased asset
The transaction results in an immediate cash
flow to the seller, which can be used to retire
debt (particularly any outstanding debt on the
asset, such as a mortgage or a collateral loan) or
used for operating purposes, or a combination of
both
18-46
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Sale and Leaseback (cont.)
 The lease part of the transaction must be

evaluated and judged to be either a capital
lease or an operating lease
The sale portion of the deal is initially
recorded just like any other sale, with a gain
or loss recorded for the difference between
the net proceeds from the sale and the asset’s
net book value
18-47
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback




Assume that Vendeur Ltd. owns a building in central
Montreal. Vendeur enters into an agreement with
Bailleur Inc. whereby Vendeur sells the building to
Bailleur and simultaneously leases it back
The historical cost of the building is $10,000,000; it is
60% depreciated on Vendeur’s books
Bailleur agrees to pay Vendeur $8,500,000 for the
building
Bailleur agrees to lease the building to Vendeur for 20
years. The annual lease payment is $850,000,
payable at the end of each lease year
18-48
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback (cont.)





There is no guaranteed residual value
Vendeur will pay all of the building’s operating and
maintenance costs, including property taxes and
insurance
The effective date of the agreement is 1 January
20X1
Vendeur’s incremental borrowing rate is 9%
Bailleur’s interest rate implicit in the lease is
computed after tax, and is not disclosed to Vendeur
18-49
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback (cont.)




The building has a net book value, after
accumulated depreciation, of $4,000,000
Since the selling price is $8,500,000, Vendeur
realizes a gain of $4,500,000 on the transaction
However, this gain is not recognized in income but
instead is deferred
The journal entry to record this sale on 1 January
20X1 is:
18-50
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback (cont.)
Cash
Accumulated Depreciation
Building
Deferred gain on sale and
leaseback of building
8,500,000
6,000,000
10,000,000
4,500,000
18-51
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback (cont.)
 The gain on the sale will be amortized over the 20
year lease term, regardless of whether the lease
qualifies as a capital lease or as an operating
lease
It is necessary to determine whether the lease is a
capital lease for financial reporting purposes--applying the three tests:
 is it likely that the lessee will obtain ownership of
the leased property at the end of the lease? No.
18-52
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback (cont.)
 will the lessee receive substantially all of the
economic benefits of the building? Uncertain. The
building was 60% depreciated at the time of the
sale, suggesting that it is not a new building.
The 20-year lease term could be 75% of the
remaining service life of the building
 is the lessor assured of recovering the investment
in the leased property, plus a return on the
investment, over the lease term? Probably,
because the present value of the lease
payments is $7,759,264 at 9%, which is at least
90% of the sales price of the building
18-53
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback (cont.)



Since at least one of the criteria for evaluating the
lease as a capital lease is satisfied, the lease-back
should be recorded as a capital lease
Using Vendeur’s IBR of 9% yields a present value of
the 20-year stream of end-of-year payments equal to
$7,759,264.
The lease is recorded as follows:
Building under capital lease
Lease liability
$7,759,264
$7,759,264
18-54
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback (cont.)
 At the end of 20X1, Vendeur:
records the interest expense (@ 9%)
pays the $850,000 annual lease payment to
Bailleur
amortizes the asset
amortizes the deferred gain
18-55
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Example of Sale and Leaseback (cont.)
 The interest expense and the lease payment will
be recorded as follows:
Interest expense
Lease liability
$698,334
$698,334
Lease liability
Cash
$850,000
$850,000
18-56
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Disclosure of Leases (Operating Leases)
 The CICA Handbook recommends that lessees

disclose, in the notes to the financial statements,
the company’s obligation for operating lease
payments for each of the next five years and for
the five-year period in total [CICA 3065.32]
Operating leases that are on a year-by-year basis,
with no obligation beyond the forthcoming year,
are usually not included in the disclosure because
there is no obligation beyond the current year
18-57
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Disclosure of Leases (Capital Leases)
(cont.)




A company’s rights to leased assets are different
from its rights to owned assets
A company can sell, modify, or otherwise dispose
of owned assets without restriction
Owned assets can also be used as collateral for a
loan
The lessee does not have the same rights of
ownership, even though the lessee bears
substantially all of the risks and rewards of
ownership
18-58
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Disclosure of Leases (Capital Leases)
(cont.)
 In order to make it clear that some of the assets
shown on the balance sheet have been obtained
through capital leases, the CICA Handbook
recommends that both the leased assets and the
related obligations be reported separately, either on
the face of the balance sheet or in a note:
 the gross amount of assets under capital leases
and related accumulated amortization should be
disclosed
 obligations related to leased assets should be
shown separately from other long-term obligations
18-59
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Disclosure of Leases (Capital Leases)
(cont.)

The CICA Handbook also recommends other
disclosures:
 the minimum lease payments for the next five
years, both by year and in the aggregate
 the details of capital lease obligations, including
interest rates and expiry dates
 any significant restrictions imposed on the lessee
by the lease agreement
 any amount of amortization of leased assets, and
 the interest expense relating to lease obligations
18-60
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada

Exhibit 18-8
18-61
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Copyright © 2003 McGraw-Hill Ryerson Limited, Canada
