[go2eu]

A capital lease with 25% of FMV buyout option when lease terminates. The buyout is not required but optional. How should we calculate the the implied interest for lessee? I would think by FMV=PV of monthly payments + PV of buyout price. But a research online find someone saying if the buyout is optional, the interest is determined by FMV=PV of monthly payments. Please clarify and if any relating FASB rules can be quoted would be great. Thanks!!!!

FAR 11/08/2011 90
BEC 11/29/2011 85
REG 01/03/2012 91
AUD 02/03/2012 86
DONE!

[Anonymous]

Bargain purchase options are called bargain purchase options because they're options, which are, as there name might imply, optional. I don't know if bargain purchase requirements exist. But we assume the BPO will be taken, the lessor structures payments based on that, the interest is determined based on that. BPO is definitely always included.

[go2eu]

@dragnets Thanks. I guess BPO is just worded differently on each lease. But anyway thanks for clarification. What if a capital lease with FMV buyout? Do we book the FMV buyout as a one time expense or sort of capitalize that?

Thanks!

FAR 11/08/2011 90
BEC 11/29/2011 85
REG 01/03/2012 91
AUD 02/03/2012 86
DONE!

[Author]

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