16. LEASE

Lessor

The Company's operating leases for automobile rentals have rental periods that are typically short term, generally is twelve months or less. Revenue recognition section of Note 3 (p), the Company discloses that revenue earned from automobile rentals, wherein an identified asset is transferred to the customer and the customer has the ability to control that asset, is accounted for under Topic 842 upon adoption for the year ended March 31, 2020. The Company did not have any automobile rentals operations prior to April 1, 2019, which the Company would have accounted for such revenue under Topic 606 for the year ended March 31, 2019.

Lessee

As of September 30, 2020 and March 31, 2020, the Company has engaged in offices and showroom leases which were classified as operating leases. In addition, the Company had automobiles leases which were classified as finance lease.

The Company occupies various offices under operating lease agreements with a term shorter than twelve months which it elected not to recognize lease assets and lease liabilities under ASC 842. Instead, the Company recognized the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company recognized lease expense on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognized the finance leases ROU assets and interest on an amortized cost basis. The amortization of finance ROU assets is recognized on an accretion basis as amortization expense, while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments made during the period. Interest expense on the lease liability is determined each period during the lease term as the amount that results in a constant periodic interest rate of the automobile loans on the remaining balance of the liability.

The ROU and lease liabilities are determined based on the present value of the future minimum rental payments of the lease as of the adoption date, using an effective interest rate of 6.0%, which is determined using an incremental borrowing rate with similar term in the PRC. As of September 30, 2020, the average remaining operating and finance lease term of its existing leases is 2.1 and 1.9 years, respectively.

Operating and finance lease expenses consist of the following:


		For the Three Months Ended				For the Six Months Ended
	Classification	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Operating lease cost
Lease expenses	Selling, general and administrative	$	99,684	$	126,438	$	205,880	$	209,176
Finance lease cost
Amortization of leased asset	Cost of revenue		489,829		—		766,348		—
Amortization of leased asset	General and administrative		539,418		—		1,072,800		—
Interest on lease liabilities	Interest expenses on finance leases		211,053		—		437,230		—
Total lease expenses		$	1,339,984	$	126,438	$	2,482,258	$	209,176

Operating lease expenses from continuing operations totaled $99,684 and $98,005 for the three months ended September 30, 2020 and 2019, respectively. Operating lease expenses from discontinued operations totaled $0 and $28,433 for the three months ended September 30, 2020 and 2019, respectively. Operating lease expenses from continuing operations totaled $205,880 and $152,061 for the six months ended September 30, 2020 and 2019, respectively. Operating lease expenses from discontinued operations totaled $0 and $57,115 for the six months ended September 30, 2020 and 2019, respectively. Interest expenses on finance leases from continuing operations totaled $211,053 and $0 for the three months ended September 30, 2020 and 2019, respectively. Interest expenses on finance leases from continuing operations totaled $437,230 and $0 for the six months ended September 30, 2020 and 2019, respectively.

The following table sets forth the Company’s minimum lease payments in future periods:


	Operating lease		Finance lease
	payments		payments		Total
Twelve months ending September 30, 2021	$	242,376	$	5,827,162	$	6,069,538
Twelve months ending September 30, 2022		313,752		2,469,925		2,783,677
Twelve months ending September 30, 2023		185,853		197,664		383,517
Twelve months ending September 30, 2024		69,752		—		69,752
Total lease payments		811,733		8,494,751		9,306,484
Less: discount		(75,215)		(720,268)		(795,483)
Present value of lease liabilities		736,518		7,774,483		8,511,001
Less: Present value of lease liabilities - discontinued operations		—		—		—
Present value of lease liabilities - continuing operations	$	736,518	$	7,774,483	$	8,511,001