BU397 Chapter 20: Chapter 20 Leases
Document Summary
Discount rate: rate implicit in the lease: rate that makes. Pv of mlp + pv of residual values = fv of leased asset. Incremental borrowing rate: the rate the lessee would have incurred if they had borrowed the funds to purchase the asset. Under similar term (length) and similar security (same type of asset: under ifrs, use the rate implicit in the lease if it is reasonably determinable, under aspe, use the lower of the two rates. Aspe: lower the rate, the higher the min. value of min. lease payments, and higher the chance lease will be capitalized. )f you don"t know the (cid:884) rates, use incremental borrowing rate. Determining rental payments: lessor sets rental payments to earn a specific rate of return (i. e. the implicit rate) If the lease has a bpo or residual value, these components do not need to be recovered through rental payments.
