Financial leasing
Recognition of financial leasing in the books
How to determine the discount rate for financial leasing contracts?
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Next - in an amount equal to the market value of the leased asset. In practice it is the lower of: purchase price of the asset or present (discounted) value of leasing instalments
- leasing instalments are split into interest costs and principal, reducing the liability at take over of the leased asset.
How to determine the discount rate for financial leasing contracts?
- In order to discount the leasing fees, the discount rate to be applied is the contractual interest rate (if possible) - external rate of return at which the current value of leasing instalments is equal to the market value of the leased asset
- If such rate cannot be determined, the marginal interest rate at which the lessee contracts or could contract an investment loan.
