Minimum lease payments are rental payments over the lease term including the amount of any bargain purchase option, premium, and any guaranteed

residual value ''Residual value'' is one of the constituents of a leasing calculus or operation. It describes the future value of a good in terms of absolute value in monetary terms and it is sometimes abbreviated into a percentage of the initial price when the i ...

and excluding any rental relating to costs to be met by the

lessor Lessor may refer to: * Lessor (leasing), the owner of leased property or the agent authorized on the owner's behalf * Lessor, Wisconsin, a town in U.S.A. * Lessor Township, Minnesota, U.S.A. See also * Lesser {{disambig, geo ...

and any contingent rentals. Leased asset is depreciated in books of lessee over its useful life if lessee intends to avail bargain purchase option otherwise depreciable period will be lease term. Cost of leased asset in books of lessee for depreciation purposes will include bargain purchase option But will exclude the Guaranteed residual value as the case maybe. Lessee will record the leased asset in his books at cost that will include present value of : lease payments, any directly attributable cost (incremental costs), bargain purchase option, guaranteed residual value, Dismentling cost. Every lease payment made by lessee will include a portion of principal amount and accrued interest (if any).

References

Australian Financial Accounting, 4th Edition, Deegan, Leasing {{finance-stub