Page 142 - IC26 LIFE INSURANCE FINANCE

Minimum Lease Payments:

For Lessor

Total Lease rent to be paid over the lease term + Any Guaranteed Residual Value by or on

behalf of Lessee + Residual Value Guaranteed by Third Party - Contingent Rent - Cost for Service

and tax to be paid by and reimbursed to lessor

For Lessee

Total Lease rent to be paid over the lease term + Any Guaranteed Residual Value by or on

behalf of Lessee - Contingent Rent - Cost for Service and tax to be paid by and reimbursed to

lessor

Accounting for Finance Lease – In the books of lessee

The lessee should recognize the lease as an asset at lower of the following

 Fair Value of the leased asset

 Present value of minimum lease payments

(In calculating the present value of the minimum lease payments, the discount rate is the

interest rate implicit in the lease. If implicit rate is not known, the lessee’s incremental

borrowing rate should be used.) Entry required to be passed:

Lease Assets A/c Dr

To Lessor

Sashi Publications Pvt Ltd Call 8443808873/ 8232083010