By using Exhibit 1 data, prepare the lessee accounting illustrations Monet requested. How well do the Chief accountant's assumed lease characteristics line up with the company's past lease term experience?In accordance to IAS 17 Leases by the International Accounting Standards Board (IASB), there are two fundamental kinds of leases: finance leases and operating leases. The classification of every lease determines the accounting requirements. Under the preceding version of IAS 17, with respect to operating leases, the lessee is not required to recognize the asset being leased in the Balance Sheet. However, in August 2010, an Exposure Draft was issued by the IASB, which encompassed revising different changes to the IAS 17 (Hawkins, 2010). In general, the net result of the exposure draft was that lessees would be required to recognize a right to use asset together with a lease liability with respect to Lease Interest for all of their short-term leases and also long-term leases reported in the balance sheet. In contrast, there would be an amortization of the right to use asset against the basis of the term of the lease or the life span of the asset being leased, whichever of the two is shorter.

Taking into account that BonneSante S.A is presently engaged in operating lease agreements with their lessor, which hands them a right of use of the company's retail outlets and also trucks (Hawkins, 2010). Bearing in mind that the amended exposure draft postulates that the parties in the lease contract...

Therefore, BonneSante ought to nullify and undo its lease agreements that have terms less than 10 years and thereafter adjust them with respect to the newfangled requirements. In turn, the lessee in the contract shall report the payments made in cash against the contract lease payment as part of financing activity in the Statement of Cash Flows. However, this should be reported in a separate manner from other financing activities (Hawkins, 2010).
As a potential BonneSante investor or creditor, how would you view the liability for future lease payments BonneSante would have to record under the ED's lessee accounting proposals? Is it like regular bank debt? If not, what is it? Would you include 100% of the recognized amount in a debt-to-equity ratio?

Prior to the August 10 issued exposure draft, BonneSante used to report its lease records with respect to the IAS 17 Leases. The implication of this is that the company recognized and reported the lease rental payments in the Income Statements as an expense against the lease contract. In essence, at this time, there was no recognition of right of use asset as a condition. Therefore, as a potential BonneSante investor or creditor at the time, it would have been incapable to classify the liability against the lease rental payments from the balance sheet. Therefore, they were experiencing issues in ascertaining the debt-to-equity ratio of BonneSante. It is not similar to the bank…