Leases

Dear Teacher, I have a question regarding the initial measurement of right of use asset. If a question states that before the commencement of the lease agreement, a deposit was made that is not the same figure as the annual payments required or if a payment was made in advance before the commencement date that was the same as the annual payments required, do we need to add the deposit to the initial figure or do we ignore it? What will be the respective treatment?

zaynahmohammed24 wrote:Why are we crediting accruals for example 1. Shouldn’t it sent to any reserve?

Why would it go to a reserve? We're recognising an expense that we've not paid for, hence an accrual. Thanks

zaynahmohammed24 wrote:Dear Teacher, I have a question regarding the initial measurement of right of use asset. If a question states that before the commencement of the lease agreement, a deposit was made that is not the same figure as the annual payments required or if a payment was made in advance before the commencement date that was the same as the annual payments required, do we need to add the deposit to the initial figure or do we ignore it? What will be the respective treatment?

You don't need to worry about this as it wouldn't appear in the exam but it would be treated in the same manner as any other deposit, regardless of the amount.