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If the lessee knows the implicit interest rate computed by the lessor (e.g., 7%) and...

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Accounting

If the lessee knows the implicit interest rate computed by the lessor (e.g., 7%) and it is less than the lessees incremental borrowing rate (e.g., 8%), then the lessee must use the lessors rate. Why does the FASB require companies to use the lower rate of 7% and 8%?

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