When Negotiating Operating Leases, Any Initial Direct Costs Incurred by Lessors

question 22

Multiple Choice

When negotiating operating leases, any initial direct costs incurred by lessors are to be:

• A) recognised as an expense over the lease term.
• B) initially capitalised into a separate deferred costs account.
• C) added to the carrying amount of the underlying asset.
• D) all of the above.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the normal operating cycle of the business, whichever is longer.

Minimum Required Rate Of Return

The lowest expected return on an investment deemed acceptable by an investor or manager, based on the level of risk and alternative opportunities.

Average Operating Assets

The average value of assets utilized in a business's operations, calculated over a specific period to assess performance.

Operating Expenses

Costs associated with the day-to-day operations of a business, such as rent, utilities, and payroll, excluding the cost of goods sold.