kim2_0001656 - Interest rate implicit in the lease the...

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Interest rate implicit in the lease: the discount rate that, at the inception of the lease, cause the aggregate present value of the minimum lease payments, from the standpoint of the lessor, to be equal to the fair value of the leased asset, net of any grants or tax credits received by the lessor. In other words, it is the discount rate that equates the present value of the minimum lease payments plus the unguaranteed residual value to the fair value of the leased property at the inception of the lease less any investment tax credit retained and expected to be realised by the lessor. Gross investment in the lease: the aggregate of the minimum lease payments under a finance lease from the standpoint of the lessor. ACCOUNTING FOR ASSETS AND LIABILITIES (PART A) A D VA N C E D 8 0 FINANCIAL REPORTING
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S T U D Y T E X T Unearned finance income: the difference between the lessor’s gross investment in the lease and its present value.
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