Finance lease – Lessee accounting question

BSBlue Sky9y ago

Hi Just want to say thanks for brilliant lectures. Really really helpful in preparation. I have a question regarding Finance lease – Lessee accounting. If in exam question we have been given FV of the item but present value of the minimum lease payments is not given, do we recognise the asset and finance lease payable at FV in this scenario? As per my understanding asset should be recorded at lower of PVMLP and FV. In one of the practice questions only FV, monthly payment amount and interest rate implicit in lease were give. Would we not try and calculate PV of all monthly payments to see if it’s lower than FV. Many Thanks

P2-D2Tutor9y ago#1

Hi, Thanks for the kind words and I'm glad you've found them useful. Your understanding of IAS 17 and finance leases are correct, I'd also recommend that if you are given the payments and rate implicit in the lease to try and work out the PVMLP. Keep up the hard work. Thanks

BSBlue Sky9y ago#2

Thank you for your answer. I attempted a practice question ( or two different questions) and calculated the PVMLP which was lower than FV given in the question. However, in the answer, FV was used to recognise the asset and finance lease payable. So not sure why FV was used.

P2-D2Tutor9y ago#3

Did you calculate the PVMLP correctly?

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