Lease Rentals Representing a Recovery of Material Executory Costs Are

question 6

Multiple Choice

Lease rentals representing a recovery of material executory costs are to be treated by the lessor as:

• A) expenses of the financial years in which the related costs incurred.
• B) expenses at inception when the related costs incurred.
• C) revenue of the financial years in which the related costs incurred.
• D) revenue at inception when the related costs incurred.

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Definitions:

Cost Method

An accounting method used to value investments, where the investment is recorded at its acquisition cost without adjusting for market changes.

Commercial Substance

A situation where the risk, timing, and amount of an entity's future cash flows are expected to change as a result of an economic transaction.

Fair Value

The capital retrieved from trading an asset or the expenditure for reallocating a liability in a well-arranged market transaction at the point of assessing value.

Carry Value

The original purchase cost of an asset adjusted for depreciation, amortization, or impairment costs on the financial statements.