Finance Lease

Lessor
Lessee
Assets & Liabilities
Lower of FV (or) PV of
minimum lease payment
(Limitation)
Assets
(as receivables)
Net investment
in leases
(No Limitation)
Accounting Standard 19 LEASES
Sreeram Coaching Point
Economic Life
No. of production
Or similar units
expected to be
obtained from asset
Period the asset
is expected
to be used
By one/more users
By one/more users
Accounting Standard 19 LEASE
Sreeram Coaching Point
Useful Life
No. of production
Or similar units
From the usage of
the asset.
Period over
which the asset is
expected to be
used by lessee
Accounting Standard 19 LEASE
Sreeram Coaching Point
Lessor
UFI
(Unearned Finance
Income)
GIIL
(Gross Investment
In Lease)
NIIL
(Net Investment In Lease)
(as receivable)
URV MLP
PV of GIIL
GIIL
GRV LP
RV
Accounting Standard 19 LEASE
Sreeram Coaching Point
(+)
Accounting Standard 19 LEASE
Sreeram Coaching Point
MLP
Lessee Lessor
LR GRV
-By lessee (or)
- By behalf of Lessee
LR GRV
-By lessee (or)
- By behalf of Lessee (or)
-3
rd
Party
+
+
Put Option / Lessor Dominant
Accounting Standard 19 LEASE
Sreeram Coaching Point
MLP
Lessee Lessor
LR Purchase
option price
(POP < FV)
LR Purchase
option price
(POP < FV)
+
+
Call Option / Lessee Dominant
NIIL = GIIL (GIIL PV of GIIL)
= PV of GIIL
NIIL = PV of (MLP & URV)
Accounting Standard 19 LEASE
Sreeram Coaching Point