Lessee
ASC 842/IFRS 16: Previously called the capital rate, this is the interest rate used to present value the rents to determine the initial asset and liability for a lease, and then to accrue interest over the life of the lease. It is the Lessor’s implicit interest rate if known; if not known, the Lessee’s incremental borrowing rate is used.
Lessor
(Previously called capital rate) If the lease is operating, this field is blank. If a finance lease is system-classified, it is filled in automatically. If the lease is user-classified finance, you are required to enter the discount rate. Enter the rate as a percentage (10% is entered as 10, not as .10). You can enter up to 12 digits to the right of the decimal place.
The most common reason to user-classify a lease is because a special situation requires overriding the normal classification process. It is generally best not to user-classify a lease finance even if you know it is finance, because you may not know the correct rate to use. Instead, let EZLease do the calculations based on the rent, fair value, and related information.