A lessee computes the present value of the minimum lease payments using the lower of either the lessee's incremental borrowing rate or the lessor's implicit interest rate in the lease.

Question

Quizplus · Accepted Answer

The lessee uses the lower of its incremental borrowing rate or the lessor's implicit rate to compute the present value of the minimum lease payments, as this approach ensures the most accurate and favorable reflection of the lease's cost on the lessee's financial statements.

A Lessee Computes the Present Value of the Minimum Lease