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How Direct Financing Leases Process Works?
How Direct Financing Leases Process Works?
• The lessor accounts for the income from the sale over time as the lease
payments are made.
• When the asset is leased, the lessor removes the asset's book value from
its balance sheet and replaces it with a receivable equal to the book value.
• The difference between the total future proceeds and the book value of
the property when it is at the time of the lease will be the profit the lessor
will receive.
How direct financing leases process works?
Rental company
How to record?
IFRS VAS
Dividing Finance lease into Sales- Finance lease is not divided into 2
type leases and Direct financing type separately
leases
IFRS helps investors have a more complete view of the status of the
two rental forms of the business (Complete characteristic)