Factors to Consider
The asset/liability should be recorded at the lower of the PVMLP or the FMV.
Depreciation period
- If lease criteria #1 or #2 met use lessee’s normal economic life of the asset. If criteria #3 or #4 met then amortize over the term of the lease (ownership is not transferred)
Use of the effective interest method to allocate each payment to principle and interest using the discount rate.
Depreciation
- Amortization of lease and depreciation of an asset are separate concerns.
- Depreciation is taken by using conventional methods.