When a lease transaction is to be capitalised, how do we determine the value of the leased asset, and the lease liability?
- At the commencement date, a lessee shall measure the lease liability at the present value of the lease payments that are not paid at that date.
- The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined.
- If that rate cannot be readily determined, the lessee shall use the lessee’s incremental borrowing rate.
At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:
(a) fixed payments (including in-substance fixed payments as described in paragraph B42), less any lease incentives receivable;
(b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date (as described in paragraph 28);
(c) amounts expected to be payable by the lessee under residual value
(d) the exercise price of a purchase option
if the lessee is reasonably certain to exercise
that option (assessed considering the factors described in paragraphs B37–B40); and
(e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.