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A lease liability is equal to the present value of the remaining lease payments. In order to determine this amount, we need to figure out three things: lease term, lease payments, and an appropriate discount rate. In this video, well talk about the lease term. The lease term begins, and should be determined, on the lease commencement date. This is the date the underlying asset is made available to the lessee. So how does an entity determine the lease term? Well, it starts with the non-cancellable period for which the lessee has the right to use the underlying asset. We then need to consider any renewal periods, but only if at the commencement date it is reasonably certain that the lessee will exercise them. We also need to consider a few things: Periods after an optional termination if the lessee is reasonably certain not to exercise the termination option; and any periods to extend or to not terminate the lease control by the lessor. When we consider all of these periods, well arriv