How the present value of the minimum lease payment is calculated

The present value of the minimum lease payment is calculated as follows: rent per installment (equivalent) Present value factor of annuity (i.e., p a, i, n) Residual value of guarantee Present value factor of compound interest (i.e., p f, i, n).

The discount rate "i" is determined as follows:

If the lessee is aware of the lessor's interest rate when calculating the present value of the minimum lease payment, it shall use the lessor's interest rate as the discount rate; Otherwise, the interest rate specified in the lease contract shall be used as the discount rate. If neither the interest rate embedded in the lease nor the interest rate stipulated in the lease contract is known, the bank loan interest rate for the same period shall be used as the discount rate.

For example, on December 1, 20x4, Company A signed a lease contract with Company B, and Company A leased an equipment to Company B by way of financial lease, and the main terms of the contract are as follows:

1. Lease period start date: January 1, 20x5.

2. Lease period: January 1, 20x5 to December 31, 20x8, a total of 4 years.

3. Rent payment: 150,000 yuan of rent at the end of each year from the start date of the lease.

4. The fair value of the machine on December 1, 20x4 is 500,000 yuan.

5. The interest rate stipulated in the lease contract is 7 (annual interest rate).

6. The initial direct cost of the lessee and the lessor is 1,000 yuan.

7. At the expiration of the lease period, Company A has the option to purchase the machine at a preferential price, the purchase price is 100 yuan, and the fair value of the leased assets on that day is estimated to be 80,000 yuan. a The company apportions unrecognized financing expenses using the effective interest method, calculates the present value of the minimum lease payment at the lease commencement date, and determines the recorded value of the leased assets.

Minimum lease payment 150,000 4+100=600,100 (yuan) The present value calculation process is as follows:

The present value of the annuity with a rent of 150,000 yuan per period is 150,000 pa (4 periods, 7), and the compound interest present value of the exercise price of 100 yuan for the preferential purchase option is 100 pv (4 periods, 7 years), and the table shows that the p.a. (4 periods, 7) pv (4 periods, 7 ) is obtained

The total present value is 150,000 yuan) 500,000 yuan.

Present Value of Minimum Lease Payment Rent per Period (Equivalent) Present Value Factor of Annuity (i.e., p a,i,n) Residual Value of Guarantee Present Value Factor of Compound Interest (i.e., P f,i,n).

If the lessee has an option to purchase the leased asset and the purchase price is expected to be substantially less than the fair value of the leased asset at the time the option is exercised, so that it is reasonably certain at the lease commencement date that the lessee will exercise such option, the purchase price should be included in the minimum lease payment.

The "minimum" in the minimum lease payment is the determinable and basic payment amount throughout the lease term, which should be included in the "long-term payable" at the time of accounting.

The minimum rental payment is divided into two scenarios:

1. If the lease contract does not provide for a preferential purchase option, the amounts payable or may be required to be paid by the lessee during the lease period include: the rent paid by the lessee for each installment during the lease period; the residual value of the assets secured by the lessee or a third party related to the lessee at the end of the lease term; Any amount payable by the lessee as a result of the lessee's failure to renew or extend the lease at the end of the lease term.

2. If the lease contract provides for a preferential purchase option, the amounts payable or may be required to be paid by the lessee during the lease period include: rent for each period of the entire lease period from the lease commencement date to the date of exercise of the preferential purchase option; Any payment made for exercising the Offer Purchase Option.

Extended Materials. Lease refers to the act of the lessor transferring the right to use the asset to the lessee to obtain rent within the agreed period. Leasing is an economic act of borrowing physical goods at a certain cost, and the lessor hands over a certain item owned by Hu Hong to the lessee for use, and the lessee thus obtains the right to use the item for a period of time, but the ownership of the item remains in the hands of the lessor.

The advantages of leasing for infested lead renters.

1) Interest income. Leasing is also a way of financial management, and the interest rate of leasing is usually higher than that of bank loans, so it is more attractive for leasing companies and financial institutions to develop leasing transactions.

2) Tax benefits. A leverage lease is a type of tax-oriented lease.

For example, Boeing sells an aircraft to a wealthy investor, and although the investor does not need the aircraft, he can lease the aircraft to a foreign airline that cannot take advantage of the tax benefits, from which the investor can derive.

In this transaction, Boeing sold its products, the investor (lessor) received a tax benefit, and the foreign airline (lessee) received the aircraft it needed in a more favourable manner.

3) High residual value. In the event that the leased property is returned to the lessor at the end of the lease term, if its actual value is much higher than the estimated residual value at the time of the initial signing of the contract, it will bring a large profit to the lessor.

Lease term. That is, the term of the lease, which indicates the period during which the tenant transfers the property to the lessee for use. The term of the lease of the item shall not exceed twenty years. If it is more than 20 years old, the excess part is invalid.

At the expiration of the lease term, the parties may renew the lease contract, provided that the agreed lease term shall not exceed 20 years from the date of renewal.

The minimum lease payment is the amount payable or likely to be required to be paid by the lessee during the lease term (excluding contingent rent and performance costs), plus the residual value of the asset secured by the lessee or a third party related to it.

Under present value measurement, assets are measured at a discounted amount of future net cash inflows expected to arise from their continued use and eventual disposal; Liabilities are measured at the discounted amount of future net cash outflows that need to be repaid during the projected period. Present value is characterized by considering the time value of money in terms of future cash flows. It is mainly suitable for long-term assets.

Calculation of the present value of compound interest, the present value of ordinary annuities, and the present value of deferred annuities.

1.Present value of compound interest.

PV=FV (1+I)-N FV: Final Value (1+I)-N: Present Value Coefficient of Compound Interest PVIF(I,N).

The above present value of compound interest can be expressed as: pv=fv pvif(i,n).

2.Calculation of the present value of an ordinary annuity.

The present value of an ordinary annuity means that the annuity A that occurs at the end of each future period is uniformly converted into the present value, and then summed up.

The formula for calculating the present value of an ordinary annuity is: p=a (p a,i,n) or pa=a pvifa(i,n) pvifa(i,n): the present value factor of the annuity.

In this formula, if the present value of the annuity is known, find annuity a, and the annuity a found at this time is called the amount of capital **, also known as the amount of investment**. The coefficient used in the calculation of the basic amount is called the capital factor.

Answer]: a, b, c

If the lessee is able to obtain the interest rate embedded in the lessor's dispersion lease when calculating the present value of the minimum lease payment, the lease embedded interest rate shall be used as the discount rate; Otherwise, the interest rate specified in the lease contract shall be used as the discount rate. If the lessee is unable to obtain the interest rate embedded in the lease of the lessor and the interest rate is not specified in the lease contract, the bank loan interest rate for the same period shall be used as the discount rate.

1. If the lease contract does not provide for a preferential purchase option, the amounts payable or may be required to be paid by the lessee during the lease period include:

1) The rent paid by the lessee for each period during the lease period.

2) The residual value of the assets secured by the lessee or a third party related to the lessee at the expiration of the lease term.

3) Any amount payable by the lessee as a result of the lessee's failure to renew or extend the lease at the end of the lease term.

2. If the lease contract provides for a preferential purchase option, the amounts payable or may be required to be paid by the lessee during the lease period include:

1) From the start date of the lease to the date of exercise of the preferential purchase option, i.e. the lease fee for each period of the entire lease period.

2) Any payments made in connection with the exercise of the Preferential Purchase Option.

1. Financial lease contract.

1) At the expiration of the lease term, the ownership of the asset is transferred to the lessee;

2) the lessee has an option to purchase the leased asset and the purchase price is expected to be substantially less than the fair value of the leased asset at the time the option is exercised, so that it is reasonably certain that the lessee will exercise such option on the lease commencement date;

3) The lease period accounts for the majority of the useful life of the leased asset (more than 75, including 75);

4) the present value of the lessee's minimum lease payment at the lease commencement date is almost equal to the fair value of the leased asset at the lease commencement date (greater than or equal to 90);

5) The present value of the lessor's minimum lease receipt at the lease commencement date is almost equal to the fair value of the lease asset on the lease commencement date (greater than or equal to 90);

6) The nature of the leased assets is special, and only the lessee can use them if they are not greatly transformed.

Second, the principle of lease classification.

1. According to the purpose of the lease, the lease is divided into two categories: financial lease and operating lease based on the degree to which the risks and rewards related to the ownership of the leased assets are attributed to the lessor or lessee. That is, lessees and lessors should classify leases based on their economic substance rather than their legal form.

2. Whether a lease should be defined as a financial lease is not determined by the form of the lease contract, but by whether the lessor has transferred the risks and rewards of the leased assets to the lessee.

3. If a lease substantially transfers all the risks and rewards associated with the ownership of the asset, the lease should be recognized as a financial lease, regardless of the form of the lease contract.

Present value of minimum lease payment = (rent paid by the lessee + residual value of the lessee's guarantee + purchase price at the end of the lease) * discount factor.

The lower of the present value of the minimum lease payment and the fair value of the leased equipment is the recorded value of fixed assets, and the difference between the two is treated as unrecognized financing expense.

The present value of the minimum lease payment is the higher of the present value of the long-term payable and the fair value of the leased equipment.