i know you use the lower of implicit lease rate and incremental borrowing rate to calculate the pv of a lease. but to calculate reported lease expense you add depreciation and interest expense. do you use implicit lease rate to calculate interest expense or do you use the lower of the two? thanks
The lower rate See Schweser note book 3 Page 250
the lease rate happens to be lower in that example. does it say anywhere that you use the lower rate and not necessarily the implicit lease rate? or, for example, is there a problem that uses the incremental borrowing rate?
always use whatever you use to calculate the PV (MLP)…