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In computing the present value of the minimum leas...

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In computing the present value of the minimum lease payments the lessee must use a discount rate. Normally, use of the lessee's incremental borrowing rate is appropriate unless: a. the lessee's incremental borrowing rate exceeds the prime interest rate on the date of the lease agreement, in which case the prime interest rate should be used. b. the incremental borrowing rate is less than two-thirds of the prime interest rate, in which case the prime interest rate should be used. c. the lessee knows the implicit rate computed by the lessor and it is greater than the lessee's incremental borrowing rate, then the lessee must use the lessor's implicit rate. d. the lessee knows the implicit rate computed by the lessor and it is less than the lessee's incremental borrowing rate, then the lessee must use the lessor's implicit rate.

 

Paper#9475 | Written in 18-Jul-2015

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