Minimum Lease Payments

Dictionary Says

Definition of 'Minimum Lease Payments'


The lowest amount that a lessee can expect to make on a lease over its lifetime. Accountants calculate minimum lease payments in order to assign a present value to a lease. The method of calculating minimum lease payments is laid out in the Statement of Financial Accounting Standards No. 13 (FAS: 13), which was published by the Financial Accounting Standards Board in 1980.
Investopedia Says

Investopedia explains 'Minimum Lease Payments'


Although common sense suggests that the minimum lease payments on a 12-month lease at $1,000 a month should be $12,000, this number can be complicated by contractual clauses. Although executory costs like maintenance and insurance are usually excluded because they are the responsibility of the lessor, several factors can be add to the cost of a lease. These include any guarantees made by the lessee to the lessor about the residual value of the leased property at the end of the lease as well as any payments for non-renewal of the lease. Once these are factored in, a reasonable present value can be assigned to the lease for accounting purposes.

Accounting for minimum lease payments differs from the perspectives of the lessee and lessor. To learn more about this subject, read the original document available from the FASB.

comments powered by Disqus
Hot Definitions
  1. Earnings Call

    A conference call between the management of a public company, analysts, investors and the media to discuss the financial results during a given reporting period such as a quarter or a fiscal year.
  2. Legal Monopoly

    A company that is operating as a monopoly under a government mandate. A legal monopoly offers a specific product or service at a regulated price and can either be independently run and government regulated, or government run and regulated.
  3. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  4. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  5. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  6. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
Trading Center