You are the accountant for Braidwood Hair Ltd. The managing director of the company has asked you to stop purchasing assets for the company and to start leasing them using finance leases. He claims that, given the ownership of the leased asset remains with the lessor, Braidwood Hair Ltd will not have to report the asset nor the liability in the statement of financial position. You are not sure if this is true or not and have decided to research the topic and prepare a report for the managing director on your findings.

Required

Prepare a report which includes the following information:

(a) Define assets and liabilities as outlined in the Conceptual Framework.

(b) Outline the recognition criteria for assets and liabilities as explained in the Conceptual Framework.

(c) Explain the difference between a finance and an operating lease. 

(d) Identify whether finance leases meet the definition and recognition criteria for assets and liabilities as outlined in the Conceptual Framework.