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Lease payments as defined are included in the accounting treatment for leases . Variable lease payments that do not depend on an index or a rate are not lease payments as defined. For example, a lease term that required the payment of a percentage of lessee’s sales revenue to the lessor is not a lease payment.
Such amounts would be recognised in profit or loss and would be part of lease accounting
Residual values When a company that owns an asset leases it to another party they have two interests in that asset:
It gives them a right to receive a series of rentals over the lease term; and
They own the asset at the end of the lease. The value of the asset at the end of the lease is called its residual value.
This figure might be guaranteed by the lessee. This means that if the asset is not worth the amount guaranteed, the lessee must pay the lessor the shortfall. On the other hand the residual value might not be guaranteed
Residual value guarantee and unguaranteed residual value Residual value guarantee :
A guarantee made to a lessor by a party unrelated to the lessor that the value (or part of the value) of an underlying asset at the end of a lease will be at least a specified amount. Unguaranteed residual value: That portion of the residual value of the underlying asset, the realisation of which by a lessor is not assured or is guaranteed solely by a party related to the lessor.
Such amounts would be recognised in profit or loss and would be part of lease accounting
Residual values When a company that owns an asset leases it to another party they have two interests in that asset:
It gives them a right to receive a series of rentals over the lease term; and
They own the asset at the end of the lease. The value of the asset at the end of the lease is called its residual value.
This figure might be guaranteed by the lessee. This means that if the asset is not worth the amount guaranteed, the lessee must pay the lessor the shortfall. On the other hand the residual value might not be guaranteed
Residual value guarantee and unguaranteed residual value Residual value guarantee :
A guarantee made to a lessor by a party unrelated to the lessor that the value (or part of the value) of an underlying asset at the end of a lease will be at least a specified amount. Unguaranteed residual value: That portion of the residual value of the underlying asset, the realisation of which by a lessor is not assured or is guaranteed solely by a party related to the lessor.
