The lessee normally measures the lease liability to be recorded as the:

Question

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The lessee should measure the lease liability to be recorded as the present value of the minimum lease payments. This is in accordance with the accounting standard ASC 842, which requires lessees to record lease liabilities at their present value based on the interest rate implicit in the lease, if known, or their incremental borrowing rate. The future value of the minimum lease payments (A) and the sum of the cash payments over the term of the lease (B) are not appropriate measures, as they do not take into account the time value of money. The fair market value of the leased asset (D) is not used in the calculation of the lease liability.

The Lessee Normally Measures the Lease Liability to Be Recorded