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Text File  |  1993-10-06  |  1.2 KB  |  27 lines
  1. HOW TO AMORTIZE LEASED PROPERTY ASSETS
  2.  
  3. IF Ownership Transferred at End of Lease?
  4.     (YES) Does Lease Contain Bargain Purchase Option?
  5.         (YES) Is Lease Term 75% or More of Asset Life?
  6.             (YES) Calculate Minimum Lease Payment (MLP).
  7.             Discounted MLP 90% or More of Fair Value of Asset?
  8.                 (YES) Operating Lease.
  9.                 No Capitalization Lease Payments Charged to Current Income.
  10.                 (NO ) Capital Lease.
  11.                 Is Lessor's Implicit Interest Rate Known Rate Less Than
  12.                 Incremental Borrowing Rate?
  13.                     (YES) Discount Rate - Lessor's Implicit Interest Rate.
  14.                     (NO ) Discount Rate - Lessee's Incremental Borrowing Rate.
  15.                     When Lease Contains Bargain Purchase Option,
  16.                     MLP - MRP + Bargain Purchase Option Payment.
  17.                     MLP - MRP + Guarantee of Residual + Penalty for Nonrenewal.
  18.                     Present Value of MLP < Fair Value of Property?
  19.                         (YES) Present Value of MLP Recorded as Asset and Liability.
  20.                         Fair Value of Property Recorded as Asset and Liability.
  21.                         Lease Obligation Reduced Using Interest Method Upon Payment.
  22.                         Ownership Transferred at End of Lease Term?
  23.                             (YES)  Lease Contain Bargain Purchase Option?
  24.                                 (YES)  Amortize Asset Over Term of the Lease.
  25.                                 Amortize Asset Over Economic Life of Property.
  26.  
  27.