BUS 321 Lecture Notes - Lecture 10: Operating Lease, Cash Flow, Financial Institution

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 321
• Professor: Jaqueline Faubert

Document Summary

Bargain purchase option (ias 17): lessee buy asset at end term really low price (< fmv) Bargain renewal option: renewal terms favourable that lessee renew. Purchase option (ifrs 16): determine if it is reasonably certain to be exercised. Asset economic life: period left used productively, assume normal repairs and maintenance. Incremental borrowing rate: rate if borrowed funds purchase asset (similar term + security) Rate implicit: pv mlp + ugrv = fv. Lease term: lease period + bargain renewal period + periods lessee forced to take. Lessee: pv of each (mnp - exclude executory cost) + grv by lessee + bro + bpo. Lessor: pv of each mnp - exclude executory cost + grv + bro + bpo + 3rd party guaranteed cash flow. Pv of annuity due: bgn n i pmt fv = 0 => cpt pv. Pv of lump sum for grv/bro: end n/n-1 for first year if bro i pmt = 0 fv => cpt pv.