The lessee measures the cost of a leased asset,and the corresponding lease liability of a finance lease,as the:

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The lessee measures the cost of a leased asset and the corresponding lease liability of a finance lease as the present value of the periodic rental payments. This is because finance leases essentially transfer the risks and rewards of ownership to the lessee, and as a result, the lessee is considered the owner of the leased asset. Therefore, the lessee must recognize the cost of the leased asset and the corresponding liability for the lease payments based on the present value of the future lease payments. The fair market value of the leased asset or the sum of the annual cash payments to be made during the term of the lease are not necessarily indicative of the cost of the leased asset or the lease liability.

The Lessee Measures the Cost of a Leased Asset,and the Corresponding