Investing Basics – Feel free to ask the most basic questions

Answer to your questions

1. Yes

Lease Liability: Lease liability is basically the total payment the company is obligated to make to the lessor (or key managerial person in this case) over the term of the lease agreement. This amount is the present value of all future lease payments and is recorded on the company’s balance sheet as a financial obligation. From what I understand this payment is not yet made but will be made in the future but please verify it with an accounting expert.

Lease Rent: The lease rent refers to the periodic payments made by the company to the lessor (KMP in this case) for the use of the leased asset during the lease term.

Now , the lease rent payments are made over time and are a part of the total lease liability.

Why is the Lease Rent higher than the Lease Liability then?
The lease rent can be higher than the lease liability for various reasons. It could be due to changes in the current value of the leased asset, changes in the lease agreement terms, or other factors like variable lease rent, additional charges, or lease modifications during the lease term. The answer to this can only be found in the lease agreement.

Also, the lease liability paid should have decreased in 2022 but it remained the same (5.85) in this case. Why?
Some of the reasons can be as below:
The lease agreement may have fixed lease payments, where the company is required to make fixed payments over the lease term without any changes or escalations. In such cases, the lease liability remains constant as the total obligation doesn’t change throughout the lease period.
The lease payments might be structured in a way that only a portion of the payment goes towards reducing the lease liability, while the rest covers the interest expense. In such cases, the lease liability may not decrease proportionally with each payment.
The lease liability is initially calculated based on the present value of future lease payments, using an appropriate discount rate. If there are changes in the discount rate or the way it is applied, it can influence the lease liability calculation.
It can also be due to changes in the lease agreement

3. This is the loan that company accepted from the promoter and then repaid to the promoter. Rough calculations at a rate of little more than 20 percent. Again this can be verified only with respect to the terms of the loan agreement.

4. Same as 2