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Why are we recognizing the ROU as PV/MV ,multiplied by CV?
I do not understand the idea behind.What does it mean rights retained to the assets.
Please kindly put more light on it Thank youImagine that an asset has the carrying amount of 30.
The asset has a life of 30 years and will be sold and leased back for 10 years.
We remove the PPE of 30 and replace it with the right of use as asset of 10.
The calculation is a bit messier because you have to compare the present value of what you are paying with the fair value of the whole asset, but the principle is the same.
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