Understanding Incremental Borrowing Rate

The lease liability reflects the obligation to make their lease payments, and the right-of-use asset represents the right to use the underlying asset for the lease term. In most of the situations, the new lease accounting guidance requires recognition by a lessee of a right-of-use asset and a lease liability on its balance sheet. The lease liability is measured as the present value of remaining lease payments. In general, each lease will require its own discount rate unless the lessee has elected to apply a portfolio approach. Our analysis will present the requirements for developing the discount rate according to the new lease accounting guidance, with a focus on determining the Incremental Borrowing Rate for lessees.
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