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Lease Liability (Present Value)
The lease liability is the present value of all future lease payments, discounted at the appropriate rate.
What's Included
FRS 102.20.50 specifies: fixed payments, in-substance fixed payments, residual value guarantees, purchase option price (if reasonably certain), and termination penalties.
FRS 102 Reference: FRS 102.20.50
The Calculation
Present value formula using the discount rate:
Present Value Calculation
Given:
Monthly payment: £1,000
Lease term: 36 months
Annual discount rate: 5%
Monthly rate = 5% ÷ 12 = 0.4167%
PV = £1,000 × [(1 - (1.004167)^-36) / 0.004167]
PV = £33,531.97
Verification
You can verify calculations using Excel's XNPV function.
Excel Verification
Use Act/365 (XNPV) day count convention for direct compatibility with Excel XNPV.
Calculate your lease liability
Enter your lease terms and see the present value calculation instantly.