Could someone please elaborate as to how Fair value (Market value) is calculated, or if in this csae the Fair Value would be the Lessors Selling price? To classify as a sales-type lease, the fair value of the asset must be greater than the lessor’s book value. If not, it is accounted for as a direct-financing lease. Thanks
Fair value = PV of MLP. For sales type lease, Fair value > book value => Seller makes dealer profit on sale. For direct financing, fair value = book value ie no dealer profit.