You are on page 1of 29

November 10, 1986

January 1, 1987

REVENUE REGULATIONS NO. 19-86 SUBJECT TO : : Taxation of Leases

All Internal Revenue Officers and Others Concerned

SECTION 1. Purpose. — These regulations pursuant to Section 277 of the National Internal Revenue Code, prescribe the rules to govern the tax treatment of lease agreements and provide guidelines for determining whether certain transactions purporting to be leases of tangible personal property are in reality conditional sales contracts. PART A INCOME TAX SECTION 2. Reporting of Income and Deductions by a Lessor or a Vendor. 2.01 Lessor if contract is a lease — The amount paid for the use of property under an agreement which is determined under these regulations to be a lease shall be considered as rental ( and therefor includible in gross income) of the lessor. Such lessor may deduct all ordinary and necessary expenses paid or incurred during the taxable year which are attributable to the earning of the income. In addition, the lessor, with respect to properties subject to an "operating lease" as defined in subparagraph 2.01/1 of this Section, will be allowed a deduction for depreciation determined pursuant to Section 30 (f) of the National Internal Revenue Code (NIRC) and the Regulations thereunder: Provided, however, that tangible personal properties listed in Annex "A" of these Regulations which are subject to "finance lease" (as defined in subparagraph 2.01/2 of this Section) may be depreciated during the primary lease period but such period shall not be less than 60% of the depreciable life of the property as indicated in Annex "A". If, under the agreement, the lessee pays to the lessor a stipulated rental, and in addition pays certain other expenses which are properly payable by the lessor, the lessor is deemed to have received as rental income not only the stipulated rental but also the amount of such other expenses paid by the lessee to, or for the account of, the lessor. 2.01/1Operating lease defined — An "operating lease" is a contract under which the asset is not wholly amortized during the primary period of the lease, and where the lessor does not rely solely on the rentals during the primary period for his profits, but looks for the recovery of the balance of his costs and for the rest of his profits from the sale or re-lease of the returned asset of the primary lease period. 2.01/2Finance lease defined — "Finance lease" or full payout lease is a contract involving payment over an obligatory period (also called primary or basic period) of specified rental amounts for the use of a lessor's property, sufficient in total to amortize the capital outlay of the lessor and to provide for the lessor's borrowing

costs and profits. The obligatory period refers to the primary or basic noncancellable period of the lease which in no case shall be less than 730 days. The lessee, not the lessor, exercises the choice of the asset and is normally responsible for maintenance, insurance and such other expenses pertinent to the use, preservation and operation of the asset. Finance leases may be extended, after the expiration of the primary period, by non-cancellable secondary or subsequent periods with the rentals significantly reduced. The residual value shall in no instance be less than five per centum (5%) of the lessor's acquisition cost of the leased asset. 2.02 "Packaged lease" not taxable as a corporation — A "package lease" or "lease package" shall not be considered as a joint venture or association taxable as a corporation as defined in Section 20(b) of the National Internal Revenue Code. 2.03 "Packaged Lease" or "Lease Package" defined — A lease package refers to that type of finance lease which has two or more lessors, particularly if the size of the lease facility is substantial relative to the exposure limits of a lessor. Under a lease package, the lead lessor either invites one or more lessors to participate as a co-lessor in the funding lease. Consequently, two or more lessors may have co-ownership of a single leased item, proportionate to their participation. For the purpose of this subparagraph, the lessors in a lease package shall be limited to finance and leasing companies registered under Republic Act No. 5980. 2.04 Taxation of income derived from "'package leases" — The rental income derived from a packaged lease shall be taxable directly to each of the participating lessors in their individual capacity, the respective shares of which shall be determined in accordance with their sharing agreement. Any gain or loss derived by the lessor who sells the lease contracts or lease receivables to one or more buyers shall be taxed as ordinary gain or loss. To compute ordinary gain or loss, the outstanding principal value of the lease as determined in Annex "B" shall be deducted from the selling price. 2.05 Vendor, if contract is a conditional sale — If the agreement is determined to be a sale, the amounts received under the contract by the vendor will be considered to be payments which are part of the sales price to the extent such amounts do not represent interest other charges. SECTION 3. Deductions Allowable to Lessee or Purchaser. 3.01 Lessee, if contract is a lease — If under the criteria set forth in these Regulations, an agreement constitutes a lease, the lessee may deduct the amount of rent paid or accrued, including all expenses which under the terms of the agreement the lessee is required to pay to, or for the account of, the lessor. If the payments are so arranged as to constitute advance rentals, such payments shall be duly apportioned over the lease term. In computing the term of the lease, all options to renew, shall be taken into consideration if there is a reasonable expectation that such options will be exercised.

is in substance a conditional sales contract depends upon the intent of the parties as evidenced by the provisions of the agreement. Civil Code. On the other hand. 4.01 Statutory basis for distinguishing a lease from a sale — A lease is a contract whereby one of the parties (lessor) binds himself to give to another (lessee) the enjoyment or use of a thing for a price certain. among which are (but not limited) those indicated in the following subparagraphs. a sale is a contract whereby one of the contracting parties (seller or vendor) obligates himself to transfer ownership of and to deliver a determinate thing while the other party (buyer or vendee) obligates himself to pay for said thing a price certain in money or its equivalent. The lessor retains ownership of the asset so that it shall not become the property of the lessee or any related third party during the term of the lease. Whether an agreement. the agreement is to be treated as a sale.03 Factors to be considered. the amounts paid to the vendor will be considered as payments which are part of the purchase price to the extent such amounts do not represent interest or other charges. (B) The lessee acquires automatic ownership of the asset upon payment of the stated amount of "rentals" which under the contract he is required to make. General criteria for characterizing an agreement as a conditional sale.) 4. In other words. (Article 1458. which in form is a lease. the Commissioner shall make the determination on the basis of all relevant facts and circumstances of each transaction. and for a period which may be definite or indefinite (Article 1643. read in the light of the facts and circumstances existing at the time the agreement was executed. No general rule. 4. .02 Vendee.03/2Compelling persuasive factors. 4. if contract is a conditional sale — If under the provisions of these Regulations. In ascertaining such intent no single test or any special combination of tests is absolutely determinative. Civil Code ). a lease is an agreement between a lessor and a lessee giving the lessee possession and use of a specific property upon payment of rentals over a period of time. applicable to all cases can be laid down. notwithstanding that the option price is equivalent to or higher than the current fair market value of the asset. A contract or agreement purported to be a lease shall be treated as conditional sales contract if one or more of the following compelling persuasive factors are present: (A) The lessee is given the option to purchase the asset at anytime during the obligatory period of the lease.3. acd SECTION 4.02 Characterizing a transaction that does not readily fit statutory concepts — In cases where the true character of the transaction cannot be definitely determined from the terms and conditions of the agreement. 4.03/1In general.

if the same is derived by a finance and leasing company registered under R. one or more of the following conditions are present: (a) Portions of the periodic payments are made specifically applicable to an equity to be acquired by the lessee. need not be submitted for advance ruling.(C) Portions of the periodic rental payments are credited to the purchase price of the asset. In cases where a lessor is engaged in the leasing business and frequently enters into a contract with various lessees under the same or essentially similar terms and conditions. (b) The property may be acquired under a purchase option.01 The rental amounts received by a lessor from a lessee under an agreement qualifying as a finance lease as defined in Section 2. Advance Ruling Required to Recognize Existence of a lease.01/2 of these Regulations shall be divided into two components. 4.A. an intent warranting treatment of a transaction for tax purposes as a purchase and sale rather than as a lease or rental agreement. any specific lease agreement entered into by the lessor and a lessee which does not substantially deviate from the terms and conditions of the model contract on the basis which the advance ruling had been secured. — In the absence of the above compelling persuasive factors or contrary implication. at a price which is nominal in relation to the value of the property at the time when the option may be exercised. Basis of the Gross Receipts Tax 6.03/3Absence of compelling persuasive factors. Thereafter. namely principal and interest to be arrived at using either the Annuity or the Sum-of-the-Years-Digits method of accounting. SECTION 5. casia PART B GROSS RECEIPTS TAX SECTION 6. 6. 5980 shall be subject to the gross receipts tax prescribed in Sections 260 and 261 (as amended by PD 1739 ) of the National Internal Revenue Code based on the remaining maturity of the lease. — The parties to a lease agreement may secure from the Commissioner an advance ruling recognizing the fact that an agreement actually constitutes a lease for tax purposes. as determined at the time entering into the original agreement. or which is a relatively small amount when compared with the total payments which are required to be made. The amount representing interest shall be determined in accordance with the formulae prescribed in Annex "B".02 The amount of interest. Amounts . may in general be said to exist if. for example. cdtai (D) The receipts of payment indicate that the payment made were partial or full payments of the asset. the lessor may submit a model lease agreement on which to base an advance ruling.

2. 6.01) shall be excluded for purposes of the gross receipts tax determined under this subparagraph.which the lessee. then the rentals resulting from the lease agreement shall be subjected too the 4% contractor's tax imposed under Section 205 of the National Internal Revenue Code.) BIENVENIDO A. 4. 6. 1987 and shall be applicable to all leases written on or after the said date. 6. ONGPIN Minister of Finance Recommending Approval: (SGD.04 If the lessor is a finance and leasing company registered under R. Commissioner of Internal Revenue ANNEX "A" SCHEDULE OF DEPRECIATION Asset classification Depreciable Life 1.) JAIME V.A.A. under the agreement. 3. 5. 8. 7. JR. 9. casia SECTION 7. pays to the lessor (in addition to a stipulated rental) for certain other expenses properly payable by the lessor (as described in Section 2.03 If the lessor is a person other than a finance and leasing company registered under R." (SGD. 5980. the rental amount received by the buyer shall be subjected to the pertinent provisions governing corporate taxation under the NIRC without prejudice to the exemptions and benefits allowed by special laws. TAN. Effectivity. Land Transportation Equipment 4 years Water Transport Equipment 8 years Air Transport Equipment 8 years Industrial Equipment Agricultural Equipment 5 years 4 years Construction Equipment 5 years Telecommunication Equipment 5 years Office Machines 3 years 5 years Main Frame Computer . 5980 and sells its lease contract or merely sells its receivables (and therefore retains title to the equipment). — These regulations shall take effect on January 1.

3 1.1 1.9 1. as may be mutually agreed upon from time to time.10.4 2.6 2.5 1.1 AIR TRANSPORT EQUIPMENT Helicopters .2 1. as may be mutually agreed upon from time to time.10 1.5 2. Materials Handling Equipment Auxiliary Equipment 5 years 5 years (Please refer to subsequent pages for details of various asset classification) 1.4 1.7 WATER TRANSPORT EQUIPMENT Tugboats Barges Tankers Purse Seiner Reefer Vessels Container Vessels Passenger Vessels 2.8 And such other similar or related equipment. 3.7 1.3 2.2 2.1 2. 11. 1.8 1. 2.11 LAND TRANSPORT EQUIPMENT Automotive Vehicles Passenger Bus Tourist Bus Asian Utility Vehicles Light-Duty Trucks (Such as Pick-ups) Medium-Duty Trucks (Such as Dump Trucks) Heavy-Duty Trucks (Prime Mover) Locomotives Trailers (Flatbed & Skeletal) Tankers (Bulk Carriers) Motorcycles AEIHaS 1. 2.12 And such other similar or related equipment.6 1. 3.

5 4.4 Prop Aircraft Turbo-Prop Aircraft Jet Aircraft 3.15 4.16 4.8 4.17 4.7 4.10 4.3 4.5 And such other similar or related equipment. as may be mutually agreed upon from time to time.2 4. TaCIDS 4.20 4.19 4.22 And such other similar or related equipment.21 INDUSTRIAL EQUIPMENT Injection Moulding Machines Extruding Machines Foundry Equipment Metal Fabrication Equipment Welding Equipment Logging Equipment Sawmill Equipment Woodworking Equipment Kiln Drying Equipment Refrigerating Equipment Mining and Quarrying Equipment Printing Equipment Textile Machines Refractory Equipment Boilers Industrial Pumps Industrial Gas Manufacturing Equipment Distilling Equipment Laboratory Testing Equipment Medical Equipment Drilling Equipment AaCTID 4. as may be mutually agreed upon from time to time.18 4.11 4.3.13 4.2 3.3 4.1 4.3 3. 4. .9 4.12 4.6 4.14 4.

6 6.7 5.3 5.1 5.4 5.8 6.12 And such other similar or related equipment.2 5.7 6.3 6.5 5.5 6.2 6. as may be mutually agreed upon from time to time.11 6. 6.11 AGRICULTURAL EQUIPMENT Threshers Palay Drilers Rice Mills Corn Mills Feed Mills 4-Wheel Tractors with farm implements 2-Wheel Tractors with farm implements Track type agricultural tractors with farm implement Hard Tractors with prime mover and farm implements Irrigation Pumps/Aerators Diesel Engines 5.5.9 6.10 5.12 6.8 5.10 6. 6. 5.9 5.1 6.4 6.6 5.13 CONSTRUCTION EQUIPMENT Bulldozers (Track type or wheel) Loaders (Track type of Wheel) Compactors Motor Graders Tractor-Scrapers Off-Highway Trucks Excavators (Track Type or Wheel) Crushing Plant Concrete Batching Plant Asphalt Mixing Plant Pipelayers Asphalt Laying Machines Hydraulic Breakers .

9 8. 10 10.1 10. 8.5 8. 7.14 And such other similar or related equipment.1 8.10 OFFICE MACHINES Adding Machines Copiers Calculators Typewriters Mini-Computers Micro-Computers Stencil Machines Mimeographing Machines Posting Machines Cash Registers 8.2 7.4 8.8 8. as may be mutually agreed upon from time to time.5 7.6 8.3 8.7 And such other similar or related equipment. as may be mutually agreed upon from time to time. as may be mutually agreed upon from time to time.6 TELECOMMUNICATIONS EQUIPMENT PABX Systems Telex Machines VFT Equipment Teleprinters Broadcasting Equipment Transmitting Equipment HaTDAE 7. 7.4 7.3 7.1 7.7 8. 9.2 8.11 And such other similar or related equipment.2 10.6. 8.3 MAINFRAME COMPUTERS MATERIALS HANDING EQUIPMENT Forklifts Container Vans Conveyor Systems .

3 11.4 11. 1. 11 11. 1739.5 10.D.7 11.7 Box Cars AEaSTC Cranes (mounted or overhead) Loaders with tines Cement Mixers 10. Recognition of lease income shall be based either on the annuity methods or the sum-of-the years'-digits (SYD) method. as may be mutually agreed upon from time to time. aTcIAS ANNEX "B" GUIDELINES IN THE DETERMINATION OF THE PRINCIPAL AND LEASE INCOME COMPONENT OF FINANCIAL LEASE RENTAL Lease rentals received by financial lessor shall be broken down into a principal and lease income component.1 11.10 Audio-Visual Equipment 11. the latter being subjected to the gross receipts tax under Sections 260 and 261 of NIRC.8 And such other similar or related equipment.4 10.2 11. Explanation follows.6 11. SEC.5 11. as may be mutually agreed upon from time to time. as amended by Section 15 of P. PART A: ANNUITY METHOD Lease income under the annuity method is derived by computing the lease rate on the diminishing outstanding principal of the net lease facility.10.9 AUXILIARY EQUIPMENT Air-conditioning Systems Generators and Accessories Elevators Escalators Water Tanks Water Heating Systems Air Compressors Cooling Tanks Anti-Pollution Equipment 11.11 And such other similar or related equipment. Determination of Lease Rate .8 11.6 10.

2.) PART B: SUM-OF-THE-YEARS'-DIGITS (SYD) METHOD Lease income under the SYD method is derived by computing the SYD factor (number of remaining periodic payments divided by the sum-of-the-years'-digits) on the total lease income. the cash flows accruing for a period. å = the summation of the series of cash flow over a period of time n = the last period in which a cash flow is expected For purposes of computing the lease rate factor.The lease rate is a function of the basic parameters that normally comprise a lease transactions. quarterly.) SEC. DTIcSH (Please refer to Exhibit I for computational examples in the determination of the lease rate factor. whether paid in advance is immaterial and shall be treated as any other in arrears payments. semi-annually or yearly. the term of the lease and the residual value. guarantee deposit. Explanation follows: SEC. Determination of SYD The SYD is computed by . 1. periodic payment. The lease rate is defined as the internal rate of return of a specific lease transaction such that: Where Ct = cash flow or period t. whether it be a net cash inflow of outflow r t = = the lease rate for a period t the periodic time involved in the lease transaction which may be monthly. Determination of Lease Income Lease income component of lease rentals shall be determined by the following formula: Outstanding principal balance of lease facility X Lease Lease income rate = for a specific factor period t (Please refer to Exhibit 2A for computational examples in the determination of the lease income component. namely: the lease amount. lease rental.

3. of remaining periodic payments (NRP) —————————————————— SYD period X Lease = specific for a Income (Please refer to Exhibit 28 for computational examples in the determination of the lease income component. b) or.) Exhibit 1 Computational Examples in the Determination of the Lease Factor . Determination of Lease Income Lease income component of lease rentals shall be determined by the following formula: Lease Total income No. Thus. for a transaction involving twelve (12) periodic payments. simply adding all the digits representing the periodic payments.a) SYD using the following algebraic equation = ——— 2 N (N+1) where N represents the number of periodic payments. SYD may be computed as follows: 1) SYD ——— 2 = 2) SYD 78 = 1+2+3+4+5+6+ = 12 (12+1) 7+8+9+10+11+12 = SEC. 2. 78 Determination of the Total Lease Income The total lease income is derived by deducting the net lease facility (lease facility minus residual value) from the total lease receivables (lease rentals.) HcaDIA SEC.

the resulting cash flows for the lessor and correspondingly lease rate factor.52 73.97087 .595.415.88 93.415.83748 .88849 .743.72242 (1.Example 1.50 135.415.000) 1.415.415. Lease Facility Guarantee Deposit : Residual Value Period : : : 0 P1.88 93.88 93.88 93.415.415.053.88 93.581.61 82.68 88.88 93.76642 .415.74409 .415.47 78.88 93.233.88 93.000 3 years in 12 quarterly installments : P93.88 93.94260 .88 93.88 93.88 ————— RentalValue Inflow Rate 1Value 2 (1.08 80.03 193.415.415.415.000 P100.88 .86261 .509.415.415.82 67.88 93.415.88 93.88 93.415.415.43 71.000.91514 .88 93.88 93.999.88 93.415.000.658.88 93.000) 90. using the formula Where r = lease rate are as follows: Present Value Discount Period Net (in qtr) 0 1 2 3 4 5 6 7 8 9 10 11 12 Net Factor at Cash 3% lease Present Lease Lease Residual Facility 1.000 .78941 .88 93.415.88 100.81309 .415.00000 93.415.88 93.694.000.955.80 69.415.485.415.81 85.70138 .000.415.88 93.415.93 75.88 payable quarterly in arrears Lease Rentals Based on the above parameters.488.000 93.

88 90.88 payable Lease Rental: quarterly in arrears Given the parameters of this lease transaction. the cash flows and the resultant lease rate factor. which would necessitate at times. example 2 would have the same cash flows as example 1 and thus. This however could be determined with greater ease with the use of a financial calculator with the capability of imputing the internal rate of return.00000 . Figures not exact due to rounding off. are as follows: Present Value Discount Period Net (in qtr) 0 1 2 Net Factor at Cash 3% lease Present Lease Lease Residual Facility 900. Discount factor at a certain rate need not be computed since this could be acquired from present value tables. TDcCIS Example 2. the lease rate factor in determining lease income is also .415. Normally.000 3 years in 12 quarterly installments P90.000. the process of interpolation.415.Total cumulative present value 0 1.000 P100.000) 85.000) 90. Consequently. finding the lease rate factor is a tedious process of trial and error. Same parameters as Example 1 except that lease rental payments are in advance.03.415.782. Example 3 Lease Facility : : : P1.97087 . The above example has shown that the lease rate factor for this specific lease transaction with the given parameters above is 3% per quarter or 12% per annum.415. For purposes of determining the lease rate factor to be used for computing the lease income component of a lease rental.01 .88 RentalValue Inflow Rate 1Value 3 (900.000 Guaranty Deposit Residual Value Period : P100.226. is immaterial.06 85.88 1.000 1 90. 2.94260 (900.88 90. timing differences of whether a periodic lease rental payment is payable in advance or in arrears.415.

415.369.415. which is in the amount of P100.76642 .55 65.415.88 90.88 90.318.88 93. TIHCcA Example 5.415. is given back at the end of the lease term and is netted out with the residual value.296. Same parameters as Example 3 except that lease rental payments are in advance. which in this example. since the guarantee deposit. The resulting cash flows for this transaction are the same as in Example 3 due to reasons explained in example 2.83748 .000. cashflow wise.415.721.3 4 5 6 7 8 9 10 11 12 90.415.000 P100.88 90.88 02 .24 63.88 90.277.415. lease rate factor is also 3% per quarter.88 ————— 90.415.415.54 67.415.88 90.000.000 3 years in 12 quarterly installments P83.61 77.64 75.415.72242 82.88 90.25 71.20 69.415.415. is 0.88 90.88 90. Thus. .000 P200.74409 .88 90.88 90. 2 The residual value for this transaction.78941 .19 80.415.415.000.88849 .743.516.415.67 payable Lease Rental: quarterly in arrears The lease rate factor for this transaction is 3% per quarter or 12% per annum as shown by the following table: 1 Lease facility minus guarantee deposit is the net cash outflow of the lessor.86261 .88 .88 90.375.415.415.88 90.70138 Total cumulative present value 0 Example 4. is also P100.49 73.88 90.81309 .88 90.88 90.415.88 90.415.89 90.333. Lease Facility Guaranty Deposit Residual Value Period : : : : P1.415.993.91514 .

12 71.812.67 83.611.369.85 63.369.369.369.94260 .67 83.000 1 83.369.11 78.67 83. Thus. 1 Net cash outflow is lease facility minus guarantee deposit.67 83.54 60.67 83.72242 (900.369.820.67 83.18 62.369.369. cashflow-wise.000.369.000) 80.369. residual value is only P100.67 83.000 is netted out at the end of the lease term from the P200.92 128.25 76.915.584.369.369.000) 83.43 67. .369.227.67 83.67 ————— RentalValue Inflow Rate 1Value 3 (900.51 69.369. 2 Guarantee deposit in the amount of P100.369.86261 . Same parameters as Example 5 except that lease rental payments are in advance.78941 .88849 .369.369.000 residual value.000 2 1.67 83.92 74.82 183.74409 .034.67 83.67 83.369.67 83.67 83.073.294.67 100.369.67 83.67 83.67 83.67 83.369.76642 .70138 Total cumulative present value 0 Example 6.369.91514 .67 83. Present Value Discount Period Net (in qtr) 0 1 2 3 4 5 6 7 8 9 10 11 12 Net Factor at Cash 3% lease Present Lease Lease Residual Facility 900.67 83.369.00000 . STaCIA Lease rate factor is also 3% per quarter or 12% per annum as Example 5.3 Figures not exact due to rounding off.67 83.787.369.369.896.67 83.04 65.83748 .97087 .67 .81309 .941.

61 69.49 17.415.91 734. Thus.318.415.00 936.24 663.000.097.415.422.64 22.040.987.277.88 93.000 3 years in 12 quarterly installments P93.88 93.000.00 28.375.88 93.54 1.03) 93.415.721.34 80.88 30.000.85 67.137.993.12 63.415.21 75. the lease rate quarterly factor is .415.09 73.97 24.39 514.36 803.00 15.751.691.35 13.296.415.88 .88 93.13 589.88 payable Lease Rental: quarterly in arrears Based on Exhibit 1.88 93.800.75 19.53 355.084.415.34 93.88 93.516.000.265.415.88 871. using the basic formula: Ending Outstanding Principal Balance of the Lease Facility of the Previous Period (t = n) we arrive at the following table: (A) (B) (C) (D) (E) Lease Rate Lease Income for the X Factor = Subsequent period (t = n+1) Ending Payment of (E-D-C) Principal Lease Income Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 Value Repayment (A) x .415.078.88 93.694.119.48 71.88 93.76 65.082.316. Lease Facility Guarantee Deposit : Period : : 0 P1.899.03. example 1.3 Figures not exact due to rounding off.333.52 26.88 436.68 77.415. Exhibit 2A Computational Examples in the Determination of the Lease Income Component of Lease Rental under the Annuity Method Example 1.415.584.

415.415.97 24.53 355.415.13 589.88 93.375.082.21 75.415. thus.00 82.137.54 8.61 69.663.097.88 871.516.24 663.39 514.24 5.88 93.36 100.88 93.76 65.415.09 73.088.52 1 93.190.987.333.179.85 67. Same parameters as Example 1 except that lease rental payments are in advance.64 100.743.415.190.000.663.88 93.751.078.000 P100.12 63.88 Example 3.000.34 273.03.34 187.415. Lease Facility Guaranty Deposit Residual Value Period : : : : P1.88 93.00 93.415.000.800.318.68 77.88 93.422.316. caTESD Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Value Repayment Income 30.36 85.00 15.10 11 12 1 273.000 3 years in 12 quarterly installments P90.415.000.36 803.277.35 13.00 28.782.694.672.75 19.296.225.415.48 71.782.34 187.88 93.088.88 93.88 Figures not exact due to rounding off.000 P100.584.52 26.415.64 100.00 87.899.54 8.52 1 936.64 22.00 87.34 80.225.415.415.721.88 436.88 93.36 85.000.993.040.88 93.88 93.88 payable Lease Rental: quarterly in arrears 1 Figures not exact due to rounding off.88 93.265.36 10.743.415.415.24 5.91 734.782.54 10.415.00 82. Example 2.88 93.782.084.49 17.691.415. lease rate quarterly factor is also . .672.

54 7.88 90.277.078.76 65.36 703.52 23.88 90.415.375.265.34 173.987.36 703.415.584.88 90.375.225.800.415.318.082.88 90.88 90.415.21 75.190.64 19.000.24 563.097.21 75.00 836. Same parameters as Example 3 except that lease rental payments are in advance.88 90.88 90.333.415.34 87.694.415.691.12 63.39 414. Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 900. ETIDaH Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 Value Repayment Income 27.88 336.09 73.88 90.48 71.36 Value Repayment Income 27.672.91 634.76 65.68 77.318.993.36 01 85.64 87.782.415.415.277.03.415.265. thus.316.85 67.88 90.49 14.899.751.97 21.415.88 90.137.415.88 90.415.584.000.00 82.03.084.64 19.078.34 80.415.52 2 90.743.415.899.24 563.782.516.13 489. Thus.516.137.040.49 14.721.12 63.53 255.000.415.119.296.85 67.00 836.09 73.88 90.633.88 90.296.54 5.91 634.00 25.694.75 16.35 10. lease rate quarterly factor is also .88 771.800.415.61 69.88 90.88 90.097.39 414.48 71.316. example 3.88 90.61 69.88 90.Based on Exhibit A.415.987.13 489.415.415.52 23.24 2.415.119.97 21.040.691.88 90.008.422.88 771.821. lease rate quarterly factor is .415.00 12.88 .88 Example 4.00 25.75 16.

24 90.415.58 664.36 01 2.751.57 58.36 85.308.67 83.369. is given back at the end of the lease term and is netted out with the residual value.069.633.66 600.54 7.67 83.060.569.34 173.369.369.000.00 82.67 83.369.308.333. example 3. : P1.782. which in this example.77 63.596.225.743.34 80.327.061.96 69.67 83.35 10.725.77 16.53 255.00 25.000.67 785.90 468.170.369.34 87.67 83.67 . 2 Figures not exact due to rounding off.190.993.741.347.91 23.52 2 90.09 21.567.000 P200.33 56.67 payable Lease Rental: quarterly in arrears Based on Exhibit A.87 65.09 83.630.11 18.672. in the amount of P100.369.67 83. Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 900. lease rate quarterly factor is .377.369.369.88 87.766.369.415.67 83.415.369.7 8 9 10 11 12 336. is also P100.415.88 90. Thus.54 5.64 12.782.88 1 Cashflow-wise.33 398.925.082.021.76 725. residual value is 0 since guarantee deposit.042.444.68 77.00 843.88 90.000 Example 5.000 3 years in 12 quarterly installments P83.415.000.000.01 19.88 90.56 535.33 61. Lease Facility Guaranty Deposit Residual Value Period : : : P100.084.34 14.99 59.802.58 Value Repayment Income 27.008.03.54 67.422.000.773.

33 56.96 69.00 1 11.377.55 71.12 100. 2 Figures not exact due to rounding off.87 65.77 63.67 785.67 83.567. residual value is P100.67 83.340.369.34 14.000.87 2 843.00 1 83.67 83. lease rate quarterly factor is also .66 600.63 178.369.784.67 83.369.77 16.09 21.80 75.58 327.369.028.80 75.01 19.925.042.67 83.369. is netted out at the end of lease term from the P200.369. since guarantee deposit which is also in the amount of P100.26 9.90 468.773.327.369.613.060.369.67 83.41 253. except that lease rental payments are in advance.80 83.26 9.03.67 1 Cashflow-wise. thus.369.596.369.63 178.369.725.92 73.369.000 residual value.55 78.334.99 59.55 71. since guarantee deposit which is also in the amount of P100.000.67 83. .57 58.67 5.04 7.67 83.76 725.369.756.407.00 78.67 83.000.340.12 100.069.58 664.00 25.000.67 83.802.028.80 100.784.369. Example 6.369.54 67.369.549.9 10 11 12 327.308.569.630.04 7.000.33 398.756.170.41 253.56 535.766.549.91 23.67 83.820.09 11.028.962. AcHCED Ending Payment of Principal Lease Lease Rental Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Value Repayment Income 27. Same parameters as Example 5.028.021.308. residual value is P100.444.55 5.369.820.11 18.33 61. 2 Figures not exact due to rounding off.000 residual value.000.000.000.92 73.613.347.061. is netted out at the end of lease term from the P200.87 2 83.741.67 83.334.67 83.962.67 1 Cashflow-wise.407.

990.49 220.165.56 11.(P1.000-P100. Thus. Lease Facility Guaranty Deposit Residual Value Period : : : : 0 P100.56 19.415.990.990.990.64 .498.55 11/78 220.56 14. the total lease income is P220.000)].990.Exhibit 2B Computational Examples in the Determination of the Lease Income Component of Lease Rentals under the SYD Method Example 1.56 8.000 P1.990.990.88 payable Lease Rental: quarterly in arrears Based on the above parameters.56 16.665.332. of remaining periodic Total Lease Lease income for a payments (NRP) ———————— SYD the lease income for periods 1 to 12 are computed as follows: Total Lease Lease Income Period NRP/STD 1 2 3 4 5 6 7 8 9 10 x Income = for the period X Income = specific period 12/78 P220.56 31.000 3 years in 12 quarterly installments P93.499.70 220.415.56 25.990.27 220.06 220.34 10/78 220.999.12 9/78 8/78 7/78 6/78 5/78 4/78 3/78 220.91 220.85 220.56 P33.000.990.56 22.56 28.56 [(93. using the formula: No.990.998.990.000.332. while the SYD is equal to 78.832.166.88 x 12) .

27 14.39 76.37 93.42 220.332.24 87.999.000. the computation for the lease income is also the same.11 12 2/78 1/78 220. Same parameters as Example 1 except that lease rental payments are in advance.415.88 445.40 93.415.88 813.416.88 524.88 674.56 =========== Using the figures above.248.13 93.916.06 11.415.415.990.54 65.582.666.46 90.499.582.415.166.750.415.22 93.997.37 93.331.56 2.998.916.88 363.332.083.76 67.64 5.666.88 600.498.33 62.415.88 878.55 31.250.56 5.415.61 79. we arrive at the following table: (A) (B) (C) (D) (E) Payment of Principal Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Lease Lease Repayment (C-D-E) Value RentalIncome 1.000.415.21 Example 2.749.833.833.88 33.88 190.49 16.85 8.581.67 100.832.248.415.22 93.332.88 278.332.03 84.415.582.13 93.00 940. thus.88 2.12 25.417.415.990.249.82 82.91 22.665.88 745.165.67 93.000.40 93.97 70.583.083.331.18 73.34 28.42 59.83 93. DTIACH (A) (B) (C) (D) (E) Payment of Outstanding Residual Lease Lease Principal .990.581.70 19.67 93.00 93.21 —————— P220.

41 10/78 184.61 79.088.88 813.34 28.415.82 82.06 .083.88 674.03 84.332. Thus.083.40 93.000.990.415.998.76 67.415.332.415.88 payable quarterly 12/78 P184.42 2.88 363.09 11/78 184.18 73.498.22 93.331.415.415.12 25.832.990.88 600.916. and the SYD is also 78.000.06 11. Total Lease Lease Income Period NRP/STD 1 2 3 4 x Income = for the period P93.88 445.582.415.248. the total lease income is P184.70 19.Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Value RentalIncome Repayment 59.13 93.416.88 190.415.88 100.54 65.00 : 33.67 940.88 524.583.166.332.990.55 31.91 22.582.665.990.46 90.000.990.49 16.415.000 P100.88 100.666.000.21 - Example 3.(P1.331.749.415.000 3 years payable in 12 quarterly installments Lease Rental: in arrears Based on the given parameters.581.40 93.165.417.56 P28.999.415.83 93.000 P100.33 62.00 93.39 76.13 93.88 878.74 9/78 184.64 5.750. Lease Facility Guaranty Deposit Residual Value Period : : : P1.249.56 23.415.24 87.250.22 93.67 93.97 70.833.460.88 278.000)].88 x 12) .000-P100.916.85 8.415.56 26.248.581.67 93.37 93.582.997.345.499.415.88 745.37 93.716.56 [(P90.27 14.56 21.332.

88 492.21 90.672.02 4.53 88.690.230.78 90.858.88 173.990.79 64.044.39 184.699.84 78.35 2.415.504.415.72 14.88 566.56 =========== (A) (B) (C) (D) (E) Payment of Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Lease Lease Principal Repayment Value RentalIncome 900.29 90.990.929.017.88 637.56 16.946.300.716.06 18.56 9.88 88.415.56 14.60 90.21 01 90.67 61.29 90.88 257.371.74 90.5 6 7 8 9 10 11 12 8/78 7/78 6/78 5/78 4/78 3/78 2/78 1/78 184.743.88 28.74 90.044.78 90.415.557.814.51 80.743.21 .86 85.601.230.88 337.14 69.460.88 773.017.601.00.185.327.56 7.442.990.716.990.72 184.973.415.070.486.115.09 26.56 11.56 4.955.70 7.37 184.990.88 707.088.04 11.990.04 184.49 73.990.486.56 18.415.973.858.990.47 66.56 2.88 416.946.82 71.415.88 90.345.415.115.00 838.74 21.60 90.716.67 —————— P184.16 76.13 90.415.415.35 184.70 184.02 184.415.37 9.044.504.415.18 83.39 16.371.41 23.990.

044.415.13 90.230.044.415.557. which in this example.504.070.78 90.86 85.74 90.000.929.09 61.504.415. residual value is 0 since guaranty deposit.88 637.858.743.371.67 payable Lease Rental: quarterly in arrears .06 18.21 Example 5.88 P28. in the amount of P100.60 90.78 90.47 66.415.345.000.21 90.04 11. is also P100. is given back at the end of the lease term and is netted out with the residual value.51 80.973. the computation for the lease income is also the same.300.000 3 years.82 71.415.88 01 - 2. SDHAEC (A) (B) (C) (D) (E) Payment of Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Lease Lease Principal Repayment Value RentalIncome 838.74 90. thus.442.185.716.21 90.017.72 14.88 566. 12 quarterly installments P83.41 23.53 90.044.415.415.88 337.460.74 21.29 90.18 83.88 492.88 773.415.88 88.486.415.955. Same parameters as Example 3 except that lease rental payments are in advance.716.35 64.716.16 76.017.88 173. Lease Facility Guaranty Deposit Residual Value Period : : : P1.946.02 4.000 P100. Example 4.415.14 69.369.415.39 16.690.1 Cashflow-wise.000 P200.79 26.60 90.672.88 257.814.000.088.115.70 7.67 : - 88.946.327.37 9.88 416.84 78.415.699.88 707.29 90.49 73.601.

is given back at the end of the lease term and is netted out with the residual value.04 10.369.04 5. Total Lease Lease Income Period NRP/STD 1 2 3 4 5 6 7 8 9 10 11 12 x Income = for the period 12/78 P200.00 847.67 611.266.418.812.436.557.04 23.636.43 62.62 10/78 200.278.836.62 25.42 83. (A) (B) (C) (D) (E) Payment of Outstanding Residual Period Balance 0 1 2 3 4 5 Lease Lease Principal Repayment Value RentalIncome 900.836.448.24 20.46 200.436.369.436.436.369.848.05 57.54 52.569.436.04 2.77 200.04 25.436.36 55.04 [(P83.13 .000)].31 11/78 200.557.04 20.000.987. while the SYD is also 78.000.04 7.127.31 28.466.369.The total lease income in this example is P200.436.67 792.696.04 P30.127.00-P200.436.67 30.139.85 83.000.93 9/78 8/78 7/78 6/78 5/78 4/78 3/78 2/78 1/78 200.266. residual value is 0 since guaranty deposit.24 200.436.85 200.08 200.369.436.363.64 83.04 28.696.00.29 83.103.672.369. in the amount of P100.59 83.04 17.69 1 Cashflow-wise.690. is also P100.16 200.533.436.67 x 12) (P1.436.000.67 674.436.67 734.242.709.74 50.04 12.04 15. which in this example.54 200.93 23.39 200.

Same parameters as Example 5.987.67 546.54 17.521.67 407.67 478. CDESIA (A) (B) (C) (D) (E) Payment of Outstanding Residual Period Balance 0 1 2 3 4 5 6 7 8 9 10 11 12 Lease Lease Principal Repayment 52.16 12. in the amount of P100.74 50.90 75.709.000 residual value.369.67 100.278.08 5.836.369.660.557.67 792.67 478.43 62.08 5. residual value is 100.85 15.67 734.030.98 83.16 12.85 15.000 since guaranty deposit.690. thus.67 334.369.51 70. is given back at the end of the lease term from the P200.812.000.67 180.77 7.139.98 Example 6. .28 70. except that lease rental payments are in advance.85 83.67 334.00 83.67 65.21 73.26 83.090.98 83.139.85 83.466.254.696.987.59 83.381.82 67.369.848.46 10.369.369.93 23.799.47 83. the computation for the lease income is also the same.242.64 83.000.369.672.75 83.302.418.781.000.781.381.569.28 2.26 83.96 83.77 7.369.302.448.39 2.42 83.47 83.278.82 67.369.103.369.59 78.96 83.363.62 25.67 674.69 80.75 83.690.951.369.521.690.67 259.67 100.533.24 20.67 407.369.848.6 7 8 9 10 11 12 546.369.230.369.369.36 55.67 259.030.69 - 1 Cashflow-wise.369.00 - 30.46 10.266.369.67 180.000.418.31 28.799.369.799.230.29 83.51 70.254.05 57.799.127.709.90 75.67 611.59 78.13 65.00 1 17.569.090.98 Value RentalIncome 847.369.636.660.67 100.85 83.39 83.951.21 73.

. I n c.C o p y r i g h t 2 0 0 8 C D T e c h n o l o g i e s A s i a.