Minimum lease payments are

rental Renting, also known as hiring or letting, is an agreement where a payment is made for the use of a good, service or property owned by another over a fixed period of time. To maintain such an agreement, a rental agreement (or lease) is sign ...

payments over the

lease A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial ...

term including the amount of any bargain purchase option, premium, and any guaranteed

residual value Residual value also known as salvage value describes the future value of a good in terms of absolute value in monetary terms after depreciation, and it is sometimes abbreviated into a percentage of the initial price when the item was new. It is one ...

and excluding any rental relating to costs to be met by the

lessor Lessor is a participant of the lease who takes possession of the property and provides it as a leasing subject to the lessee for temporary possession. For example, in leasehold estate, the landlord is the lessor and the tenant is the lessee. The le ...

and any contingent rentals. Leased asset is depreciated in books of lessee over its useful life if lessee intends to avail bargain purchase option otherwise depreciable period will be lease term. Cost of leased asset in books of lessee for depreciation purposes will include bargain purchase option But will exclude the Guaranteed residual value as the case maybe. Lessee will record the leased asset in his books at cost that will include present value of : lease payments, any directly attributable cost (incremental costs), bargain purchase option, guaranteed residual value, Dismentling cost. Every lease payment made by lessee will include a portion of principal amount and accrued interest (if any).

References

Australian Financial Accounting, 4th Edition, Deegan, Leasing {{finance-stub