07-03-2006, 06:14 AM
Here r the replies of ur queries
plz ask if any confusion still remains(i hope it will)
1)cancellable lease
a cancellable lease is like a standing offer. U can cancel it at any time. And regarding point D, it says that whenever u have to pay some amount to cancel the lease and u have an intention to continue it, it will be classified as a non-cancellable lease. The basic motive of this definition is to ensure that whenever there is a payment or hinderance to cancellation of lease, it will be a non-cancelable lease.
If we apply a restriction like clause D of para 4 on an operating lease, it becomes a non-cancellable lease. A finance lease cannot be a cancellable lease. u shud read para 11(a). tell me if u need explanation.
2) Here he is talking about the payment required to exercise the option. U may compare It with the example of share option scheme, where v pay something to exercise the option. Here he is including such a payment in the MLP. The payment that is less than FV will be included in any case.
3) Whenever an arms length transaction is carried out at a nominal value, it will surely cast suspicion regarding the knowledge and willingness of the party giving such benefit. Knowledgeable means that there is no involvement of misrepresentation, mistake or fraud in the transaction and willing means there is no undue influence or coercion involved.
4) Right
5) u r right in treatment. Take an example. If u say that ur implicit rate of interest would be higher of 10% or KIBOR+3%. Initially u take 10%. Later on KIBOR+3% increases 10%. Then ur rentals will be increased and the increase would be a contingent rent.
6) u r right. As u go through the definition of MLP u will find that MLP can be different for lessor and lessee. So, if for lessor MLP discounted=FV and for lessee not so, then the lease would be finance lease for lessor and operating for lessee.
7) Both the lessee and the lessor (other than manufacturer or dealer) shall include those costs in the cost of asset. Such costs incurred by manufacturer or dealer lessors are excluded from the definition of initial direct costs.
plz ask if any confusion still remains(i hope it will)
1)cancellable lease
a cancellable lease is like a standing offer. U can cancel it at any time. And regarding point D, it says that whenever u have to pay some amount to cancel the lease and u have an intention to continue it, it will be classified as a non-cancellable lease. The basic motive of this definition is to ensure that whenever there is a payment or hinderance to cancellation of lease, it will be a non-cancelable lease.
If we apply a restriction like clause D of para 4 on an operating lease, it becomes a non-cancellable lease. A finance lease cannot be a cancellable lease. u shud read para 11(a). tell me if u need explanation.
2) Here he is talking about the payment required to exercise the option. U may compare It with the example of share option scheme, where v pay something to exercise the option. Here he is including such a payment in the MLP. The payment that is less than FV will be included in any case.
3) Whenever an arms length transaction is carried out at a nominal value, it will surely cast suspicion regarding the knowledge and willingness of the party giving such benefit. Knowledgeable means that there is no involvement of misrepresentation, mistake or fraud in the transaction and willing means there is no undue influence or coercion involved.
4) Right
5) u r right in treatment. Take an example. If u say that ur implicit rate of interest would be higher of 10% or KIBOR+3%. Initially u take 10%. Later on KIBOR+3% increases 10%. Then ur rentals will be increased and the increase would be a contingent rent.
6) u r right. As u go through the definition of MLP u will find that MLP can be different for lessor and lessee. So, if for lessor MLP discounted=FV and for lessee not so, then the lease would be finance lease for lessor and operating for lessee.
7) Both the lessee and the lessor (other than manufacturer or dealer) shall include those costs in the cost of asset. Such costs incurred by manufacturer or dealer lessors are excluded from the definition of initial direct costs.
