Lease Determination Template

10/23/2014
248626104.xls/Documentation
NORTH DAKOTA UNIVERSITY SYSTEM
CAPITAL LEASE DETERMINATION
INSTRUCTIONS
This worksheet was designed to determine if a lease is a caital lease or oerating lease. !omlete the cells in the "#nal$sis" sheet%
then click on the "!alculate !aital or &erating" 'utton (this 'utton must 'e clicked again if data is changed in !ol. )*. !lick on the
"#morti+ation Ta'le" 'utton and fill in the re,uested information. !lick "&-" to see an amorti+ation schedule for the lease a$ments.
!lick on the "Terms" sheet to see the calculation results.
The worksheet uses the four tests for a caital lease from .#/0 13 1 #ccounting for !aital 2eases. 3f a lease meets an$ one of the
following four tests% it is a caital lease.
3f at its incetion% a lease meets one or more of the following four criteria% the lease is classified as a caital lease '$ the lessee.
&therwise% it is classified as an oerating lease4

a. The lease transfers ownershi of the roert$ to the lessee '$ the end of the lease term.

'. The lease contains a 'argain urchase otion1 (ie.% for 51 the lessor ma$ urchase the e,uiment*.

c. The lease term is e,ual to 67 ercent or more of the estimated economic life of the leased roert$. 8owe9er% if the 'eginning of
the lease term falls within the last 27 ercent of the total estimated economic life of the leased roert$% including earlier $ears of use%
this criterion shall not 'e used for uroses of classif$ing the lease.

d. The resent 9alue at the 'eginning of the lease term of the minimum lease a$ments% excluding that ortion of the a$ments
reresenting executor$ costs such as insurance% maintenance% and taxes to 'e aid '$ the lessor% including an$ rofit thereon% e,uals
or exceeds :0 ercent of the excess of the fair 9alue of the leased roert$ to the lessor at the incetion of the lease o9er an$ related
in9estment tax credit retained '$ the lessor and exected to 'e reali+ed '$ him. 8owe9er% if the 'eginning of the lease term falls within
the last 27 ercent of the total estimated economic life of the leased roert$% including earlier $ears of use% this criterion shall not 'e
used for uroses of classif$ing the lease. # lessor shall comute the resent 9alue of the minimum lease a$ments using the interest
rate imlicit in the lease. # lessee shall comute the resent 9alue of the minimum lease a$ments using his incremental 'orrowing rate
unless (i* it is ractica'le for him to learn the imlicit rate comuted '$ the lessor and (ii* the imlicit rate comuted '$ the lessor is less
than the lessee;s incremental 'orrowing rate. 3f 'oth of those conditions are met% the lessee shall use the imlicit rate.
The worksheet makes all calculations for the lease once the correct information is inut on the "#nal$sis" sheet. The following items are
used to exlain the logic 'ehind the calculations.
Determining the Amount to Capitai!e"
The amount to 'e caitali+ed for the lease is the lower of the total resent 9alue or the fair market 9alue. The total resent 9alue is
calculated '$ using the lower of the lessor;s imlicit rate (if known* or the lessee;s incremental 'orrowing rate.
Determining the Intere#t Rate to u#e to Amorti!e Lea#e Pa$ment#"
3f the total resent 9alue is less than the fair market 9alue then $ou use the interest rate used to calculate the total resent 9alue (lower
of lessor;s imlicit rate or the lessee;s incremental 'orrowing rate*. 3f the fair market 9alue is less tn the total resent 9alue then $ou
must imute an interest rate. To imute $ou use trial and error to figure the interest rate that makes the resent 9alue of the lease
a$ments and 'argain urchase otion (if resent* e,ual to the fair market 9alue. The resent 9alue of the lease a$ments is
calculated as an annuit$ while the 'argain urchase otion is a single lum sum a$ment.
%argain Pur&ha#e Option#"
# 'argain urchase otion if resent (test 2* will affect the lease calculations in two wa$s. .irst it must 'e used to imute the interest
rate if necessar$. /econd the 'argain urchase otion is considered the final a$ment on the lease in the amorti+ation schedule. This
means that after the final lease a$ment the lease rincial remaining should e,ual the 'argain urchase otion. 3f the lease a$ments
are made at the 'eginning of the eriod (annuit$ due*% there is some interest that accumulates 'etween the last a$ment and the
a$ment of the 'argain urchase otion which will 'e reflected in the 'argain urchase otion a$ment. #n examle of a lease with a
'argain urchase otion is included with this documentation.
2ast udated 06/01/0:
10/23/2014
INSTRUCTIONS




10/23/2014
INSTRUCTIONS




10/23/2014
INSTRUCTIONS




LEASE IN'ORMATION
An#(er a )ue#tion#* I+ an#(er i# none, enter -
Date comleted4
!omleted '$4
Does the lessee assume ownershi< (=/>*
.air market 9alue of asset at lease incetion
#sset?s total economic life
#sset?s remaining economic life
#mount of down a$ment or trade1in (if an$*
@inimum lease a$ment
0argain urchase rice (if an$*
2essor?s in9 tax credit at lease incetion (if known*
2ease a$ment structure4
2ease term in $ears
(A*nnual / (S*emi1#nnual / (.*uarterl$ / (M*onthl$
(%*eginning of eriods / (E*nd of eriods
2ower of the lessee?s incremental
'orrowing rate or% if known% the lessor?s
imlicit rate
>&AT8 D#-&T# B>3C)A/3T= /=/T)@
!#D3T#2 2)#/) D)T)A@3>#T3&>
2eased 3tem4 3nstitution4
-
E#22 .&A@B2# DA3C)>% >& D#T# )>TA= >)!)//#A=F
Te#t /" Lea#e Tran#+er# O(ner#hip
Does the lessee assume ownershi< (=/>*
0
Te#t 0" %argain Pur&ha#e Option
3s there a 'argain urchase otion< (=/>* N
0argain urchase rice 1-*--
Dresent 9alue of 'argain urchase rice 2VALUE3
0
Te#t 4" Term 5 678 o+ E&onomi& Li+e
2ease term in $ears -*--
#sset?s total economic life -*--
#sset?s remaining economic life -*--
Dercent of remaining life at start of lease 2DIV9-3
GGG
Te#t :" Pre#ent Vaue o+ Lea#e Pa$ment#
@inimum lease a$ment 1-*--
.air market 9alue of asset at lease incetion 1-*--
#mount of down a$ment or trade1in 1-*--
2essor?s in9 tax credit at lease incetion 1-*--
-*--8
Con&u#ion"
222 GGG
0 12/30/::
MISCELLANEOUS CALCULATIONS
>um'er of annual a$ments CHECK 'RE.* O' PAYMENTS
Dresent 9alue of @2D 2VALUE3
2essee?s total resent 9alue 2VALUE3
DC1of1a$ments/@kt 9alue 2VALUE3
!omuted imuted interest rate NA
!alculation of imuted rate
2ow 0.072370:676
@id 7.24H
8igh 0.072370:6:3
DC Da$ments GC#2B)I
DC 0D& GC#2B)I
Total DC GC#2B)I
(A*nnual / (S*emi1#nnual / (.*uarterl$ / (M*onthl$
(%*eginning of eriods / (E*nd of eriods
2ower of the lessee?s incremental 'orrowing rate or%
if known% the lessor?s imlicit rate
3f the lease transfers ownershi% then it is a
caital lease.
3f the lease contains a 'argain1urchase clause
allowing $ou to 'u$ the asset for su'stantiall$
less than fair 9alue of the asset at the end of the
lease% it is a caital lease.
3f the lease term e,uals 67H or more of the
asset?s estimated economic life% it is a caital
lease. 8owe9er% if the 'eginning of the lease
falls within the last 27H of the asset?s total
estimated economic life% it is >&T a caital
lease.
3f the resent 9alue of the minimum lease
a$ments (lus downa$ment and 9 of
'argain urchase* is :0H or more of the
asset?s fair 9alue% it is a caital lease.
The amorti+ation ta'le will determine whether
to caitali+e the asset at the lower of .@C or
the DC of the @2D. 3f .@C is used% the
imuted rate will 'e calculated and used in the
ta'le.
10/23/2014
Dage 6 248626104.xls/#mortJTa'le
2)#/) #@&AT3K#T3&> T#02)
2)//&A4 2)//))4 D)/!A3DT3&> &. 2)#/)D 3T)@4
2)#/) !2#B/)/4
.irst Da$ment Date4
!aitali+ed Calue4 GC#2B)I GC#2B)I
2ease &'ligation4 GC#2B)I
3nterest Aate4 GC#2B)I er $ear
#nnual Da$ment4 50.00
Term of 2ease4 0.00 $ears
!aital 2ease !riteria4 GD3C/0I
D#=@)>T 3>T)A)/T 2)#/)
G D#T) D#=@)>T )LD)>/) DA3>!3D#2 &023M#T3&>
GC#2B)I
GC#2B)I 12/30/18:: 50.00 GC#2B)I GC#2B)I GC#2B)I
GC#2B)I GC#2B)I GC#2B)I GC#2B)I GC#2B)I GC#2B)I
10/23/2014
10/23/2014
Dage : 248626104.xls/#mortJTa'le
10/23/2014
10/23/2014

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