Yakub02
Banned
A lease is a finance lease if at the inception of the lease, the present value of all the future lease payments amounts to substantially all of the fair value of the leased asset, or more.
(The discount rate to be used in calculating the present value of the lease payments is the interest rate implicit in the lease). In this case the lessee is paying the full cash price of the asset together with related finance expense over the lease term
Leases of land and buildings A property lease usually includes both land and buildings. Each element should be classified separately.
In other words, a property lease is viewed as a lease of land and a different lease of the building. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets. Land element .
An important consideration is that land normally has an indefinite economic life. This means that the lease term will not normally be for a major part of the life of the asset and the asset will have a significant value at the end of the lease. This implies that the land element of the lease will usually be an operating lease.
(The discount rate to be used in calculating the present value of the lease payments is the interest rate implicit in the lease). In this case the lessee is paying the full cash price of the asset together with related finance expense over the lease term
Leases of land and buildings A property lease usually includes both land and buildings. Each element should be classified separately.
In other words, a property lease is viewed as a lease of land and a different lease of the building. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets. Land element .
An important consideration is that land normally has an indefinite economic life. This means that the lease term will not normally be for a major part of the life of the asset and the asset will have a significant value at the end of the lease. This implies that the land element of the lease will usually be an operating lease.
