A Direct Financing Lease is a method used by lessors in capital leases where the lessor purchases an asset specifically for rental purposes. The lease payments must be collectable, and there should be no significant uncertainties about any unreimbursable future costs.
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.
