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Hello mike, 1 last question regarding finance leases, if Present value of Minimum lease payments (MLP) is lower then Fair value of the asset, should we use that amount to calculate interests on and inclusion in LTL and F.A? or is it Fair value that should be used to calculate depreciation and being included in LTL and F.A ( and also interest being calculated on )
If the PVMLP is substantially lower than the FV of the asset, the lease might be an operating lease.
However, if the lease is a finance lease, the it should be recorded as an asset and a liability at the lower of the fair value of the asset and the present value of the minimum lease payments.
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