The minimum lease payments are the lowest amount that a lessee can expect to make over the lifetime of the lease. The minimum lease payments, including a guarantee of a residual if applicable, are used to value the lease by doing a net present value (NPV) calculation. The method of calculating minimum lease payments is laid out in the Statement of Financial Accounting Standards No. 13 (FAS 13), Accounting for Leases.

When I first joined TimeValue Software, it took me a while to understand the difference between Daily (compounding) and Exact Days. Both methods calculate interest each day but that is where the similarity ends.

Occasionally, we get a customer that has a unique situation where they have to do daily payments. Sometimes they are only during the business week and sometimes they are 7 days a week.  This is a calculation that you can do in TValue but it takes a little bit of creativity to do it.

We often get customers asking us “should I do my loan with compound interest or simple interest?”. The answer is borrowers benefit from simple interest and lenders could benefit from compound interest. Often, the financial institutions do not give you a choice.

If you are interested in manually calculating an interest amount with irregular payments, you need to understand the impact of a stub period in the calculation.  Sometimes the calculations are easy to verify and sometimes you may get a hybrid calculation because you have to do two calculations to verify the interest amount.