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hi mike
why do we take the lower of fair value and present value on minimum lease payments??
because eventually we will be paying the lease payments and should be capitalizing thatThe simple answer is … because that’s what we’re told to do in the international standard!
It’s basically to prevent the manipulation of the figures in the financial statements – if we took the full non-discounted aggregate of payments, this would / could lead to huge distortion of realistic figures
And one of the features of financial statements is that they should be fairly presented
OK?
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