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What is Meant By the Present Value of Minimum Lease Payment?

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Question added by Meh Engelbert Kum , Revenue Assurance Manager , Vodacom Business Africa, Cameroon
Date Posted: 2014/05/08
Laiq Farooqi
by Laiq Farooqi , Documents controller , AECOM REDCO QATAR

If a lessee automatically gains ownership of the asset at the end of the lease, or if the lessee can buy the asset at a bargain price at the end of the lease, the lease should be capitalized. A lease should also be capitalized if the lease runs for 75% or more of the asset's useful life, or if the present value of the lease payments is at least 90% of the asset's fair market value when the lease is created.

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