Yakub02
Banned
In some parts of the world a property lease might be very long (say 999 years). In a case like this the unguaranteed residual value might be very large but in present value terms is negligible, leading the present value of the lease payments to be substantially all of the fair value of the asset at the inception of the lease.
Such a lease could be a finance lease. Building element The building is classified as a finance lease or as an operating lease according to the guidance set out and explained . Splitting the payments It is necessary to split the rental payments for the land and building into the rental for the land and the rental for the building.
The lease payments are allocated between the land and the buildings elements in proportion to the relative fair values of the leasehold interests in the land element and buildings element of the lease at the inception of the lease.
The relative fair value of the leasehold interests is from the point of view of the lessee. This means that the relative fair value of the leasehold interests is not the same as the relative fair value of the land and the building
Such a lease could be a finance lease. Building element The building is classified as a finance lease or as an operating lease according to the guidance set out and explained . Splitting the payments It is necessary to split the rental payments for the land and building into the rental for the land and the rental for the building.
The lease payments are allocated between the land and the buildings elements in proportion to the relative fair values of the leasehold interests in the land element and buildings element of the lease at the inception of the lease.
The relative fair value of the leasehold interests is from the point of view of the lessee. This means that the relative fair value of the leasehold interests is not the same as the relative fair value of the land and the building
