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granted, the additional five-year term will be negotiated at the time of the renewal request. As the Town built this building as part of the lease agreement, to the specifications agreed upon with the lessee, the Town reasonably expects the lease agreement to be renewed and thus includes the five- year renewal as part of the lease term. The discount rate applied to this lease is 3.5% as determined by the bond issued to finance the construction of the building. The value of the lease receivable as of December 31, 2025 is $649,300. The value of the deferred inflow of resources is $503,222 at December 31, 2025. The future payments included in the measurement of the lease receivable at December 31, 2025 were as follows: Fiscal Year Ending December 31, Principal Interest Total 2026 $ 63,852 $ 35,112 $ 98,964 2027 66,123 32,841 98,964 2028 68,474 30,490 98,964 2029 70,910 28,054 98,964 2030 73,432 25,532 98,964 2030 and thereafter 306,510 72,852 379,362 $ 649,300 $ 224,882 $ 874,182 Lease Payable—The Town is a lessee for a noncancellable lease of various equipment. The town recognizes a liability and an intangible right-to-use asset (lease asset) in the government-wide financial statements. The Town recognizes lease liabilities with an initial, individual value of $5,000 or more. At the commencement of a lease, the Town initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight-line basis over its useful life. Key estimates and judgments related to leases include how the Town determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments. • The Town uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the Town generally uses its estimated incremental borrowing rate as the discount rate for leases. • The lease terms include the noncancellable period of the lease. • Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the Town is reasonably certain to exercise. The Town monitors changes in circumstances that would require a remeasurement of its leases and will remeasure the right-to-use asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability. As the lessee, the Town reports lease assets with other capital assets and lease liabilities with long- term debt on the schedule of long-term liabilities. The Town is lessee for office equipment such as printers and postage machines. - 105 -