Indent basis意思

"Indent basis" is a term used in accounting and finance, particularly in the context of lease accounting. It refers to the method used to calculate the amount of lease payments that can be recognized as an expense in the financial statements.

Under an indent basis, the lease payments are allocated between the finance cost (or interest cost) and the reduction of the lease liability (or capital portion of the lease). The allocation is based on the present value of the lease payments, which is calculated using the interest rate implicit in the lease or, if that rate is not readily determinable, the lessee's incremental borrowing rate.

The calculation involves "indenting" or "discounting" the future lease payments back to their present value using the appropriate discount rate. The difference between the present value of the lease payments and the fair value of the leased asset (if any) is then recognized as a lease liability on the balance sheet. The finance cost is recognized as an expense in the income statement, and the reduction of the lease liability is recognized as a cash outflow in the cash flow statement.

The indent basis method is used to provide a more accurate reflection of the lessee's financial position and cash flows by recognizing the lease liability and spreading the cost of the lease over the lease term, rather than recognizing the entire lease payment as an expense in the period in which it is incurred.