Initial Direct Costs – Operating Lease – Lessor

Hello,

IFRS 16 para 83 states “A lessor shall add initial direct costs incurred in obtaining an operating lease
to the carrying amount of the underlying asset and recognise those costs as an expense over the lease term on the same basis as the lease income.”

How does that look as a journal entry? Do you debit it to the asset or is it a new account underneath the asset?

e.g.
Dr PPE = $500
Cr Cash = $500
Recognition of initial direct costs of negotiating the lease

OR

Dr Deferred Initial Direct Costs – PPE = $500
Cr Cash = $500