Concept
Initial Measurement
Lease Liability = PV of remaining payments. ROU Asset = Lease liability + prepaid rent + initial direct costs - incentives.
PostedUpModule Details
FARLesson 2 of 3
Lessee Accounting
Key Point
Finance vs. Operating Expense Pattern
Finance: front-loaded (amortization + declining interest). Operating: straight-line single expense. Same total over the term — different timing.
Example
Discount Rate
Use the rate implicit in the lease if determinable. Otherwise, use the lessee's incremental borrowing rate.
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Practice questions from this module to reinforce what you learned.