Hey hey hey,
Mr Bear is finally comin', no? After some previous false alarms, this time Mr Bear had come for real. This time, he really made a big entry. Rest assured, he will stay for a while. I think the Bull had overstayed his welcome. It's time for him to leave and take a sabbatical rest. Although my flirtin' with the Bull was brief, it was still the best time of my life. Miss you. See you around when you are back next time, kay? So long. Don't over do yourself. Take good care. I would like to see a great healthy Bull that last longer distance ya.
When you go shopping with Mr Bear, people give you huge discount since his reputation precedes him. No questions asked. They just want to get rid of the stocks in their hands as quickly as possible. But the point is are we seeing the rock bottom price cut yet? I don't think so. For those whose investment horizon is short, better take profit or cut loss now.
Please welcome Mr Bear! Kinda miss you too. Hope to do some nice shopping with you.
2 comments:
I am looking at the following section in the CFA book
Volume 3 , page 566
Balance Sheet effect of Capitalized Lease
Here the author talks about Capitalized Leases in which the assets and liabilities are amortized using different methods as a result the Assets != Liabilities during the period of the lease.
Why are they amortized using different methods?
I know the assets are amortized using the straight line method what about the liabilities?
At the inception of the lease, both assets and liabilities are recognized at PV of all the future CF. In this case, $31,700 using 10% as the discount rate over 4 years.
The liabilities part is treated differently. It consists of two parts. The interest part and the principal part. In the first year, the interest part is $31,700 x 10% = $3,170. This leaves principal part of $10,000 - $3,170 = $6,830. This means that in the first year alone, the lessee had made a principal payment of $6,830 to the lessor. This reduces the liabilities of the lessee to $24,870 ($31,700 - $6,830) in the following year. The treatment is the same for the next 3 years where the lease payment of $10,000 consists of both interest and principal. (Refer to the table at page 565).
It is amortized using different methods because you must treat assets and liabilities differently in balance sheet.
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