188体育

Example

Alan leases an asset to Betty. The market value of the asset is 拢1 million and Alan received a grant of 拢150,000 towards its purchase. For the purpose of the lease payments test that makes the fair value of the asset 拢850,000.

If the present value of the payments under the lease is 拢750,000 it means that the lease rentals are expected to recover 拢750,000 of the original cost (plus interest) and the residual amount is 拢100,000.

The present value of the lease rentals is 88.2% of the fair value (750,000/850,000) and so the lease payments test is met.

The lease does not quite meet the 90% indicative test of SSAP 21.

Whether or not the lease is accounted for as a finance lease under UK GAAP or IFRS will depend on looking at all the terms of the lease and surrounding circumstances. However, the accounting classification does not matter for the purpose of this test.