ASC 840 / IAS 17 Capital Lease Example

Let’s take as an example a copier lease, under the ASC 840 or IAS 17 accounting standards. The copier costs $3,500 to purchase new; the lessor is willing to lease it to you for 3 years, starting in 2015, at a price of $115 per month, paid at the beginning of each month. Of that, $16 is identified as the cost of maintenance. If you borrowed money for three years to finance the purchase of the same copier, you would have to pay 8.5% interest. If you bought the copier, you would normally depreciate it over 5 years. There is an option to buy the copier at the end of the lease for $500, which is estimated to be its fair market value at that time. Download Now to access our full ASC 840 / IAS 17 Capital Lease Example!