# Lease table

I remember last time there was a discussion about there being a discrepency between CFAI and schweser notes about how first payment is treated when lease payment is due to be made on the first of the month.

The discussion was that CFAI deducted the first payment from lease liability before calculating the interest for the first year, but as per schweser, first amount is deducted after calculating the interest for that year. I was convinced with argument of some people on the forum that as soon as you sign the lease, you make the first payment and this is the reason why you deduct first payment from the calculation but schweser doesn’t seem to follow this. Could some please let me know what should be done for the first payment when lease payment is due on the first of the month?

Schweser has it both ways. In their example, they assume that the lease payment is made at the end of the year (similar to mortgage). They have the beginning of the period example in their advanced concept checkers at the end of the chapter. See prof note.

@CMLSML I know they have both the examples. But I am not comparing END vs BGN. My question is specifically for the BGN and comparing approaches taken by schweser and CFAI for treating the first payment. That too my claim is based on one of the post on this forum. I don’t know if CFAI has really done that. By the way, thanks for the response!

The issue that you mention - Schweser’s way vs. CFAI way is wrong way to look at it.

If in reality the lease is structured to make a payment at the beginning of the period (which I think is normal), then we use the method in Schweser example (in the Advanced questions). If the problem specifies that the payment is made at the end of the period, then we use the example in the chapter. Obviously, if the payment is made at the beginning of the period, blindly applying the interest rate is going to give you wrong results. This is amortization 101.

Personally, I am sure that we are not going to prepare a lease table - exam is multiple choice.

@CMLSML I don’t think we are on the same page. I am pointing to a very specific issue.