Hi, I need so help on the following question: Company A leases a Asset from company B a leasing company, How would the asset be listed in the balance sheet? I read that it is recored in the Books of comapny A as the PV of the annuities, is that correct? and do the annuity paymemts include both the pinciple and interset payment? Thanks
Assuming the company capitalises the lease, a liability will be recorded in the balance sheet equal to the PV of the minimum lease payments (so the lease/rent expense and principal repayment). An asset is also recorded of the same amount and depreciated over the life of the lease. The lease liability should be split into current and non current lease obligations.