FAS 13: The effective or imputed interest rate for a capital lease. If a lease is capital, an interest rate is calculated for purposes of breaking down every rent payment into interest and principal repayment. If the present value of the rents at the incremental borrowing rate (or implicit interest rate, if known and lower than the incremental rate) is less than the fair value of the leased property, the capital rate is the incremental borrowing rate (or implicit interest rate, if that was used). Otherwise, the rate is that interest rate which causes the present value of the rents to be equal to the fair value (which will be higher than the incremental or implicit rate). This causes the lease to be capitalized at the lower of cost or market price.
This rate is normally calculated automatically by EZLease. Under ASC 842/IFRS 16, this is called the