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Sir,
I am unable to understand two lines can you please make me understand this with a example:a. If FV of sale consideration > FV asset, then this is a prepayment of lease term.
b. If FV of sale consideration < FV asset, then this is a additional financing (a secured loan).Thank you 🙂
Are you sure that you have these the right way round?
My instant reaction would be to suggest that they should read:
a. If FV of sale consideration < FV asset, then this is a prepayment of lease term.
b. If FV of sale consideration > FV asset, then this is a additional financing (a secured loan).Looking at b. first, where an asset is being sold and leased back, the fair value of that asset is, say, $100 and the consideration paid to us by the leasing company is $120 (so now the fair value of the consideration > fair value of the asset) surely that’s the situation where that $20 difference represents additional finance … a secured loan
Does that make it any easier?
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