Financial lease calculations.
There is an asset of fair value @ 3,512,000. There are 4 payments –
150,000 quarterly and yet the last one (after year) is purchase of this
asset @ 3,200,000. Quaterly payments are made in advance. To record the
value I need to use min of either fair value or NPV of MLP.
First of all, I need to calculate IRR, then MLP based on IRR. A
colleague of mine told me that because of advance payments IRR should
be calculated as IRR(3,362,000…150,000…150,000…150,000…3,200,000)
saying that initial fair value should be decreased by 150,000. But as I
understand it should be like
IRR(3,512,000…150,000…150,000…150,000…150,000…3,20 0,000)

Appreciate if you can advise on these functions and correct lease
treatment since I need to calculate impact on P&L & BS of finance
charge and reduction in obligations. Unfortunetely never met with
financial lease. If you know any useful links on this issue …I’ll be
obliged to you for them.

Thanks,
Littleps


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