Recognition of leases in the financial statements of lessees

Recognition of leases in the financial statements of lessees

Financial leases

Set-up-company-in-vietnam-Vinasc113. At the inception of a financial lease, the lessee will recognize the financial leased asset as an asset and liability in its balance sheet with the same value equal to the reasonable value of the leased asset.

If the reasonable value of the leased asset exceeds the present value of the minimum lease payments for the lease, the present value of the minimum lease payments shall be recorded.

The discount rate used for calculating the present value of the minimum lease payments for the lease will be the interest rate implicit in the asset lease contracts or the interest rate inscribed therein.

If the interest rate implicit in the lease contract is undeterminable, the lessee’s incremental borrowing interest rate will be used for calculating the present value of the minimum lease payments.

14. When presenting liabilities concerning financial leases in the financial statements, short-term and long-term liabilities must be distinguished.

15. Initial direct costs incurred in connection with financial leasing activities, such as costs for lease contract negotiation and signing will be recognized into the historical costs of the leased assets.

16. Payments for a financial lease of assets will be apportioned between financial costs and the amounts payable for debt principals. Financial costs must be calculated according to each accounting period of the entire lease term at a constant periodic interest rate on the remaining debit balance of each accounting period.

Tax-consulting-services 117. A financial lease shall give rise to asset depreciation costs as well as financial costs in each accounting period. The depreciation policy for a leased asset must be consistent with the depreciation policy for assets of the same kind under the ownership of the lessee-enterprises.

If it is uncertain that the lessees would obtain the assets’ ownership by the end of the lease term, the leased asset will be depreciated over the shorter duration between the lease term and its useful life.

18. When presenting leased assets in the financial statements, the provisions of the accounting standard “Tangible fixed assets” must be complied with.

Operating leases

19. Payments for an operating lease (excluding service, insurance and maintenance costs) must be recognized as production and business costs by the straight line method during the entire asset lease term regardless of the payment mode, unless more reasonable calculation methods are applied.

Recognition of asset leases in the financial statements of lessors