Under ASPE, which statement is correct for the lessee?
A)Using the higher of the incremental or implicit rate maximizes the present value of the minimum lease payment calculation.
B)Using the lower of the incremental or implicit rate maximizes the present value of the minimum lease payment calculation.
C)Using the incremental borrowing rate maximizes the minimum lease payment calculation.
D)Using the implicit rate maximizes the minimum lease payment calculation.

Question

Quizplus · Accepted Answer

Under ASPE, for the lessee, using the lower of the incremental borrowing rate or the implicit rate in the lease maximizes the present value of the minimum lease payment calculation. This is because a lower discount rate results in a higher present value of the lease payments, which is relevant for recognizing the lease liability and right-of-use asset.

Under ASPE, Which Statement Is Correct for the Lessee