A lessee must use which one of the following discount rates to value a capital lease?
A)Prime rate
B)Implicit lease rate
C)Lessee's incremental borrowing rate
D)Lower of implicit lease rate or lessee's incremental borrowing rate

Question

Quizplus · Accepted Answer

The correct discount rate to value a capital lease (or finance lease under newer standards) is the lower of the implicit lease rate or the lessee's incremental borrowing rate. This ensures the lease is valued based on the most accurate and beneficial rate for the lessee, reflecting either the specific rate inherent in the lease or the rate the lessee would have to pay for a similar borrowing.

A Lessee Must Use Which One of the Following Discount