Present value
The current worth of a future stream of cash flows, discounted at a given rate.
Definition
Present value (PV) is the technique used to measure the lease liability. Future lease payments are discounted back to their equivalent current value using the applicable discount rate. Payments further in the future are worth less today, so longer leases with the same annual payment produce higher liabilities at lower discount rates.
Why it matters
The discount rate chosen has a direct and material effect on the present value of the lease liability. A 1% difference in discount rate can change a liability by several percentage points, particularly for long leases.
In AuditLease
AuditLease uses exact-date XNPV-style present value calculation, discounting each payment by the precise number of days from commencement to payment date.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence — so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.