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Which of the following would not be included within the initial cost of a right?of?use asset?
A Installation cost of the asset
B Estimated cost of dismantling the asset at the end of the lease period
C Payments made to the lessor before commencement of the lease
D Total lease rentals payable under the lease agreement
This question belongs to Kaplan
I chose C but answer were given D
but Total lease rental payable is capitalised
pls clarify my this question?
It is a a bit of a trick but it is the present value of lease payments that is part of the ROU asset and not the total payments, hence the correct answer is D.
C is part of the ROU asset as this would include any deposits made at the start of the lease period.