The actuarial method is a technique employed in accounting, particularly lease and pension accounting, to allocate rentals and determine charges using principles of compound interest.
Minimum lease payments refer to the regular rental payments excluding executory costs, which are made by the lessee to the lessor in a capital lease. These payments are reported as an asset and a liability at the discounted value of future minimum lease payments by the lessee.
Net Investment in a Lease refers to the total amount of the lessee's investment, calculated as the sum of lease receivables and any unguaranteed residual value of the leased asset, discounted to present value.
Off the balance sheet (OBS) refers to financial transactions where the property involved does not appear on the company’s balance sheet. This technique is often used to keep debt-to-equity ratios lower and manage financial reporting more favorably.
A lease in which the lessor meets the criteria for a capital lease and additionally satisfies criteria regarding collectibility and predictability of costs.
