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Leases | Note 12 – Leases
Operating leases
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate.
The Company leases its corporate office space and certain facilities under long-term operating leases expiring through fiscal year 2028.
The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of August 31, 2021 and 2020:
Lease obligations at August 31, 2021 consisted of the following:
During the year ended August 31, 2021, the Company entered into new lease obligation of $296,317.
The lease expense for the years ended August 31, 2021 and 2020 was $858,847 and $788,272, respectively. The cash paid under operating leases during the years ended August 31, 2021 and 2020 was $834,502 and $772,798, respectively.
At August 31, 2021, the weighted average remaining lease terms were 5.98 years and the weighted average discount rate was 8%.
Finance leases
The Company leases certain equipment under lease contracts that are accounted for as finance leases. If the contracts meet the criteria for a finance lease, the related equipment underlying the lease contract is capitalized and amortized over its estimated useful life. If the cost of the equipment is not available, the Company calculates the cost by taking the present value of the lease payments using an implicit borrowing rate of 5%.
The net book value of equipment under finance leases included in property and equipment on the accompanying balance sheet at August 31, 2021 is as follows:
Future minimum finance lease payments are as follows:
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