Without any numeric values, Excel’s present value formula looks something like this: = PV (RATE, NPER, PMT,, )īut what exactly do all those abbreviations mean? How might your company’s inputs to the formula change when applying ASC 842 guidance? Read on to find out. The formula can still be utilized to calculate the present value of variable lease payments if set up in a table format however, due to its various complexities, I will not be addressing present value calculations for variable payments or other unusual lease components. Please note: the formula described in this post assumes static payments and a simple lease structure. Once the present value of total lease payments has been calculated using the formula, I’ll walk through the journal entry to add the right-of-use asset and lease liability to your company’s books. Outlined below are the components of Excel’s present value formula and how each input can be affected in the application of the new lease standard. In my last post, I listed items required to calculate right-of-use assets and lease liabilities.
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