Lev Vygotsky was a psychologist that revolutionised the universe with his theory on socio-cultural development. His theory of socio-cultural development centred on the impression that a kid learns through grownups or equals. In other words a kid â€˜s cognitive development is engaged through the kid â€˜s environment, this means that a kid develops through interaction with other persons. Vygotsky â€˜s theory differed from other theoreticians theories ; one of them was Piaget, a Swiss psychologist. His theory was that kids learn from the interior out, this means that a kid takes their ain cognition to the universe ( as discussed in category ) . Piaget â€˜s theory focused on two constructs, one was the construct of assimilation, which is a cognitive procedure whereby new experiences and information are placed in the cognitive construction of the kid. The other construct is adjustment ; this is a cognitive procedure which refers to the ensuing Reconstruction that takes topographic point when new information is taken in. Vygotsky on the other manus believe that a kid â€˜s acquisition takes topographic point from the exterior in, which merely means that a kid â€˜s environment determines what s/he learns. In Vygotsky â€˜s socio-cultural acquisition theory one must familiarize oneself with the constructs before we can get down to hold on the thought of theory and utilize it right. The most of import characteristic to hold on is the zone of proximal development. The zone of proximal development is defined as the difference between what a scholar can make without aid and what he or she can make with aid ( Wikipedia ; the zone of proximal development ) . In footings of one â€˜s apprehension, the ZPD is the distance between the existent development degree of a kid as determined by independent job resolution and the degree of possible development of a kid as determined through job work outing through equal or grownup interaction. The existent development of a kid is the maps that have already matured and the scholar understands. The possible degree of development is the maps still in ripening, the apprehension has non developed. The ZPD allows scholars to intercede through societal interaction. ( Maths method: 1 ; Goba, B ) Vygotsky believed in three of import facets that form his theory, this is the societal context, linguistic communication and mediation. These three facets are of import in the sense that ; the societal context is the context in which scholars are coming signifier. So they may come into the universe with some sort of cognition already instilled in them, this cognition may non needfully be right. Some scholar â€˜s societal context may implement some sort of racism this may do the kid racialist. In other words kids gain their cognition through societal contexts, from birth the kid â€˜s societal interaction depicts the sort of cognition s/he will convey to society. Because the environment is of all time altering, cognition is of all time altering. So cognition is ne'er inactive. The following facet is linguistic communication being the frontal line for the footing of this theory. If a scholar can non understand linguistic communication be it mathematical, mark or the linguistic communication medium, the scholars knowledge can non turn and spread out because of a barrier with does non allow the development of the scholars cognitive construction. Language is a manner to pass on, and if linguistic communication is non understood than the communicating nexus is broken. And the last facet is the function of mediation. In order for effectual communicating to take topographic point at that place must be some signifier of mediation to help the communicating. This is where the ZPD comes into drama. The scholar may non understand a peculiar construct by manner of mediation, something or person that aids the apprehension so the kid goes from what they do n't understand to what they can hold on. Harmonizing to Vygotsky, â€œ Every map in the kid â€˜s cultural development appears twice: first, on the societal degree, and subsequently, on the single degree ; foremost, between people ( interpsychological ) and so inside the kid ( intrapsychological ) . This applies every bit to voluntary attending, to logical memory, and to the formation of constructs. All the higher maps originate as existent relationships between persons. â€œ The socio cultural theory is so defined as a theory of larning that looks at the part society as made in an person â€˜s development ( psycology.about.com ) . It does non merely concentrate on the scholar as an person but as the scholar and cultural context on a whole. Vygotsky explained this theory in footings of linguistic communication. He argued that societal interaction signifiers this new larning through the ZPD where scholars gain new linguistic communication through societal interaction. It outlines of a linguistic communication as uniting both the traditional behavioral and lingual place of linguistic communication. This theory of linguistic communication can propose that the function of the environment can bring forth differences in understanding. The socio-cultural theory was adopted by Jerome Bruner and made westernized, now it â€˜s used all over the universe.Case survey:My name is Triona Pillay and I â€˜m 19 old ages old. I live in an Indian township. This twelvemonth I did my instruction pattern 220 at an Indian school which many non American indians besides attend. After learning pattern 120 and all the different facets we covered with the fluctuations of school types we could travel to, I thought I â€˜d be good equipped to manage any schoolroom state of affairs with the manner in which learning pattern 120 had instructed us to. However the schoolroom situations we encountered was different to the 1s we were told to conceive of. Traveling into Teach at a school where the medium of linguistic communication is English was what I perceive to be easy because that my place linguistic communication and that â€˜s the linguistic communication that scholars should be familiar with. But that was merely the beginning of my job during my instruction pattern. Bing a mathematics pedagogue was more hard as scholars could n't hold on specific constructs. My first error was that scholars had prior knowledge to the subjects being taught, in the instance of my class: 10 category, the subject was analytical geometry. They did n't understand that when a negative is squared the figure because positive. The scholars taught prep was a gag and category clip was for socializing. And so I had the instructor â€˜s position who said that the scholars know the work and they complain for nil that they do n't understand. Society has deemed that it â€˜s by and large that black scholars that do n't understand English and wo n't be able to understand what is being asked, but in this school the Indian scholars got confused with the English. Simple operations like 3x=9, hence ten =3 the scholars did n't understand how the reply 3 is obtained. Another thing that I found dismaying was that the schoolrooms were obviously n simple with no existent postings to do the schoolroom a topographic point where scholars want to come. All in all my instruction pattern was a existent experience on how scholars and grownups and their environment act upon their behavior and public presentation. Something that I found rather absorbing was during a staff meeting and they were discoursing why a peculiar scholar behaves so horrid at school and one of the suggestions was because of the manner his male parent treats him. Apparently the male parent really hit the kid in forepart of the instructor and walked off and a twosome of other times the male parent sent the kid with burst lips. This is non the lone ground I believed for the jobs I â€˜ve encountered. I believed at that school it â€˜s a popularity competition were everyone wants to suit in so the brilliant people stick to the smart people and the blue 1s maintain to their kin. And one time you come to rate: 8 u get initiated into one of those tonss. This is my personal positions on the state of affairss that occurred during my instruction pattern and some of the grounds why I believe the state of affairss occurred.Problem work outing utilizing Vygotskian socio-cultural theory:The major job I identified during learning pattern was the deficiency of both mathematical linguistic communication and cognition and the ability of the scholar to show their thoughts or sentiments in category due to the linguistic communication barrier of practical English words. First I â€˜d wish to indicate out that job can non be solved over dark. It requires gradual input from both the instructors and the scholars. My first program of action in my category is to promote reading in my category. Possibly I can propose that the school put in topographic point 30 proceedingss of readings in the forenoon. The section of instruction does direct schools educational newspapers that they can give to scholars to read. The more the scholars read the more the scholars build up their vocabulary. My co-workers and I can present 10 new, interesting and exciting words that the scholars can utilize during the hebdomad, at school to replace the mundane words that they use all the clip. Using Vygotsky â€˜s rules will take some patients from both the scholars and the instructors particularly for instructors who have been learning for 20 plus old ages, many people are non subjected to alter. The following measure as a maths instructor is to construct on anterior mathematical cognition and actuate the scholars, so that if they understand the rudimentss the remainder will follow. I could besides promote the scholars with higher Markss to assist those who are missing behind. We can besides hold excess categories during the interruption to heighten their mathematics accomplishments. This is a great thought as scholars can remain out of problem and acquire work done. The scholars need proper staging and we as instructors need to supply the necessary counsel. Vygotsky introduced that a kid learns through his or her environment so if the kid is taught in an environment conducive to larning the kid may bask coming to that schoolroom and larn something. I could propose to scholars that they join equals who traveling to better their instead than act upon them negatively. The following thought is a slippery one because from the clip I was in school I noticed instructors who tried to make out to scholars whose environment at place is unstable, changeable down by parents who think they know it all and believe that the instructor is interfering and should mind their ain concern. To hold a parent meeting is sometimes ineffectual because the good scholars parents merely end up coming and the parents you need to see do n't. Harmonizing to Vygotsky in a schoolroom state of affairs we the instructors are the go-between, we should hence be care how we give off information because scholars are immature and can sometimes misinterpret what we say. So when instruction, as a hereafter instructor I need to do certain I â€˜m clear and precise. Concepts need to be to the point and one should non crush around the shrub. I could besides present the construct of motive in my category. If I aid the scholars in their acquisition and even in their efforts in larning I will be able to take them from the known to the unknown. Using motive scholars will desire to â€œ seek â€ and work harder and by this get a better usage of both the medium of linguistic communication and the mathematical linguistic communication as a whole. The schoolroom environment is another are that I can promote scholars development. If I make the schoolroom environment a merriment manner to larn and scholars wo n't acquire laughed at and hit down for seeking. Children learn from their errors so if I encourage them and they give the incorrect reply and we correct it, they wo n't bury. In decision my belief is that Lev Vygotsky was a psychologist whose theory greatly influenced the universe. His socio-cultural theory if understood decently can help both instructors and scholars efficaciously to accomplish top consequences. I besides believe that parents should seek their best to give their kids the best societal contexts and maintain them off from negative influences. As a hereafter instructor I â€˜ve learnt a batch from Vygotsky â€˜s theory and will utilize this theory productively when I start learning.
1. Accounting Treatments Capital Lease -Lessee Initially, the lessee recognizes the asset under his property, plant and equipment. The amount that should be debited is the Lower of assetâ€™s fair value and present value of minimum lease payments. The present value is determined by discounting minimum lease payments using interest rates implicit in the lease. Also, initial direct cost that the lessee incurs in relation to the lease is added to the cost of recognized asset. On the credit side of the entry should be lease liabilities, which is in fact, some kind of a loan. The lease liabilities should be split into current and noncurrent liabilities as some payments are made within 12 months while others are made after 12 month of the reporting date. Subsequently, there are two things we must take care of. First, we must depreciate the lease asset over the economic life, not over the lease term because that doesnâ€™t necessarily need to be the same. The entry is to debit depreciation expense in profit or loss and credit the accumulated depreciation account. Secondly, we need to allocate the lease liability or minimum lease payments paid to the lessor into two parts; reduction of lease liability and finance charge or interest. IAS 17 requires the finance charge to be allocated so as to produce a constant periodic rate of interest (interest rate implicit in the lease) on the remaining balance sheet liability. (Refer to appendix A for journal entries Capital lease-Lessor The lessor is a finance provider, and therefore records lease receivables as the debit side of the entry. The lease receivable is the net investment in the lease, which is the total of minimum lease payments and unguaranteed residual value. Total of these two figures is gross investment in the lease and we need to discount it to present value using discount rate implicit in the lease and all this must be equal to fair value of the asset plus initial direct cost. The credit side to this entry is simply cash given out by the lessor. Subsequently, we have to split minimum lease payments received from the lessee between reduction of finance lease receivable and finance income similar to what the lessee would do. (Finance income should reflect a constant periodic rate of return on the lessorâ€™s netÂ investment in the lease.) (Refer to appendix A for journal entries) Operating Lease-Lessee In an operating lease, the lessee does not recognize any asset. The lease payments are recognized as rent expense in profit or loss on a straight-line basis. The journal entries would include a debit to rent expense and credit to cash or accounts payable. (Refer to appendix A for journal entries) Operating -lessor Lease payments received from the lessee are recognized as revenue in profit or loss on a straight-line basis. The lessor keeps the asset on his financial statement and depreciates it in line with its fixed asset accounting policy. (Refer to appendix A for journal entries) Advantages of Operating Lease In an operating lease, the lessee is considered to be renting the equipment and thus the lease payment is recorded as rental expense. No assets or liabilities are recorded on the balance sheet (Off-balance sheet financing). This is beneficial for companies because it will result in a lower asset base, therefore creating a higher ROA. Operating lease will also display more desirable solvency ratios such as lower debt to equity. This off balance sheet method of recording will also produce better debt covenant ratios for the company to show its debt lenders. Moreover, some companies associate management bonuses to certain ratios such as return on capital, which would be more optimal looking if recorded under operating lease. Another major benefit of operating leases is the potential tax benefits. An operating lease may allow the company to deduct payments as operating expenses during the period in which they are paid. If the company purchases equipment, they may be able to deduct the interest, as well as the cost of the depreciation. 2. Under current Financial Accounting Standards Board regulations, what business arrangements might FedEx have made in order to account for leases as operating leases rather than capital leases? An operating lease is usually coined as anything that is not classified as a finance lease.Â Factors that an operating lease may include are: 1. If a lease does not significantly transfer all the risks and rewards, associated with ownership of an asset the lease 2. If the ownership of the asset is more likely to go back to lessor at the end of the term 3. The lessee does not have the option to buy the asset at a cost significantly below the fair value of the asset â†’ ie. a bargain price. The term of the lease is not a major part of the economic life of the lease item. IAS 17 does not explicitly say how much is a major portion however ASPE states that 75% and above is a major portion. 5. If there is little or no risk to the lessee; all major risks are borne by the lessor. An example would be cancellation costs. 6. The leased asset is of common nature; not specialized and can only be used by the lessee. 7. The present value of the total amount of minimum lease payments do not equal or is close to the fair value of the asset leased. Other Additional Criteria can be: 8. Whether fluctuation in fair value at the end of the lease accrue to the lessor 9. If the lessee does not have the option to extend the lease for a secondary period at a â€œbelow the marketâ€ price Arrangements FedEx would have to make to disclose the operating lease would include disclosures about: the outstanding payments left for non-cancellable operating leases for the time periods: within one year within two to five years after more than five years the total future minimum sublease income for non-cancellable subleases the lease and sublease payments recognised in income for the period the contingent rent recognised as an expenseÂ the general description of significant leasing arrangements, including contingent rent provisions, renewal or purchase options, and restrictions imposed on dividends, borrowings, or further leasing For operating leases, IAS 17 states that the total lease payments should be incurred as an expense and would appear on the income statement regularly with the amount on a straight-line basis over the entire lease term. Any enticements that the lessee may have received from the lessor to enter into the lease arrangement, must also be divided on a straight line basis to offset theÂ rental expense. 4. Lease Capitalization on Financial Variable and Ratios Unrecorded Lease Liability and Debt-to-Equity Ratio Based on the ratios and calculations performed there are many incentives for companies to report leases as operating leases rather than capitalize them. It can be concluded that the impact of lease capitalization on the financial statements is far greater for FedEx than UPS, however both companies are reaping benefits from reporting leases as operating leases. Capitalizing leases requires that leases are recorded as assets and liabilities on the balance sheet. The Unrecorded Lease Liability is 98.41% of existing liabilities for FedEx and 8.27% for UPS. Thus, by not capitalizing leases, firms are able to decrease their liabilities and present a more lower debt/equity ratio.The Debt/Equity ratio gives stakeholders an indication of the capital structure of the firm. The ratio for FedEx moves from 0.97 to 2.70, which indicates a more leveraged capital structure. UPS ratio moves from 0.87 to 1.28. The capitalization of leases would not allow FedEx to maintain a debt-equity ratio below 1, which would change shareholderâ€™s view on the financial flexibility of the firm. If FedEx wishes to maintain a relatively low debt-to-equity ratio on their financial statements it would be unfavourable to capitalize leases. Return on Asset The Return on Assets (ROA) is another key ratio that is affected when leases are capitalized due to the increase in assets that the company owns. When leases are capitalized there is a decrease in ROA for both FedEx and UPS by 1.69% and 0.32%, respectively. This is a relatively significant drop in efficiency and further motivates firms to record leases as operating leases. Interest Coverage Ratio The interest coverage ratio informs stakeholders of a companyâ€™s ability to pay back their interest. There is a significant drop of 17.26 in FedExâ€™s interest-coverage ratio and a drop of 9.2 in UPSâ€™s interest coverage ratio. This means that a certain amount of profit is attributed to the fact that leases are not capitalized. In conclusion, it is clear from the variables and the ratios analyzed why companies prefer to record leases as operating leases rather than capitalize them. Operating leases are kept off the balance sheet and their main impact on the income statement is rent expense since the risks of ownership are not assumed. On the other hand, when leases are capitalized, the present value of payments including interest expense,Â is treated as a liability on the balance sheet. These two accounting methods result in ratios to be more favourable for the firm when leases are recorded as operating leases rather than financial leases. 5. New Exposure Draft: A Contract-Based Approach Development of Contract-Based Approach Leasing is a critical activity in business as it is a means of gaining access to assets, obtaining finance and reducing an entityâ€™s exposure to the risks of asset ownership. Some key advantages of leasing assets rather than purchasing assets are 100% financing, flexibility and the tax advantages. Therefore it is crucial that leases are appropriately accounted for and nature and duration of the lease agreement is considered. Current models require lessees and lessors to account for leases as either finance leases or operating leases. A recurring criticism of this approach is that lessees are not required to recognize assets and liabilities arising from operating leases. We can see the benefits of this in the financial statements and ratios of FedEx and UPS, as discussed above. In our opinion capitalizing leases provides stakeholders of a less aggressive view of a companyâ€™s financial statements. The contract based approach ensures that companies recognise the right to use an asset along with the contractual liability on its balance sheet. Recognition and Measurement (Lessee) IASB and FASB are proposing a new approach to lease accounting that ensures entities record assets and liabilities arising from a lease. With this new approach, a lessee would recognize assets and liabilities for leases with a maximum possible term of more than 12 months. Under this contract-based approach, the asset is taken on by the lessee as the right to use to asset and not the asset itself. This a key difference between the contract-based approach and finance leases. When the lease is acquired, the lessee would recognise a lease liability. This would refer to the obligation of the lessee to make recurring lease payments. Additionally, the lessee would recognize a right-of-use asset representing a lesseeâ€™s right to use the underlying asset for the lease term. The right-of-use asset would include the initial measurement of the lease liability, any lease payments made at or before commencement date and any initial direct costs incurred by the lessee. The proposal further categorizes the leases into Type A and Type B leases. Type A Lease Recognition Leased assets otherÂ than property (such as equipment and vehicles) would be classified as a Type A lease. However, if the following two conditions are met, the lease would be classified as a Type B: if the lease term is an insignificant portion of the assetâ€™s economic life and if the present value of the lease payments is insignificant relative to their fair value. Initial measurements for a Type A lease would include a right-of-use asset and a lease liability. The lease liability would be measured at the present value of the lease payments, measured at the rate charged by the lessor. If that rate cannot be immediately determined, the lessee uses the incremental borrowing rate. Subsequent measurements would recognize interest expense and the amortization of the right-of-use asset separately on the income statement and balance sheet. This would be accounted for separately from the amortization of the asset. Type B Lease Recognition Leased assets of property (such as land or a building) would be classified as Type B leases. Initial measurements would be parallel to the initial measurements of Type A assets. However, subsequent measurements would recognize a single lease cost. This cost would be a measurement of the interest expense as well as the amortization of the asset. This combined figure would be calculated on a straight-line basis. Effect on Existing Operating Lease Existing operating leases must be appropriately treated based on the accounting standards for leases. Leases that were previously reported as operating leases by lessees should be recognised using the new approach at the beginning of the earliest comparative period. The lessee should recognize the lease liability, which is the present value of the remaining lease payments. For Type A leases, a right-of-use asset is measured as a proportion of the lease liability. The proportion is based on the remaining lease term at the time of the earliest comparative period. Additionally, the right-of-use asset recorded should be adjusted for any previously recognised prepaid or accrued lease payments. On the other hand, for Type B leases, a right-of-use asset is measured at an amount that equals the lease liability. The asset is then adjusted for previously recognised prepaid or accrued lease payments.
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