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Hello Sir,
If we are given the fare value for the leased asset then how we have to calculate the depreciation on the asset as I have seen in chapter 12 ,practice no 1 the fare value was used to calculate the depreciation not the Pv of the payment why is that Sir,
But for the finance cost we have to deduct from fare value the down payment if any and apply the implicit rate to it .
My question is when we have to use the fare value not the PV and consequently the right of use amount for depreciation
Also what amount we have to show in the financial position for the asset and liability.
Thanks,
Hi,
Technically the present value of the payments would be the fair value, although there might be subtle differences.
The amount to be depreciated is the amount that is capitalised as a right of use asset based upon the rules on initial recognition of the lease liability and corresponding right of use asset.
Thanks
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