BLM11020 - Lease accounting: lease classification: 'fair value'
The ‘fair value’ of the leased asset is, at its simplest, usually its cost.
But cases may not always be simple, particularly where the asset is not new when leased.
FRS 102 Glossary defines ‘fair value’ as being:
“The amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm’s length transaction”.