Question

The insurer leases 15 branch premises (3–5 years) with renewal options it is reasonably certain to exercise. Rent has fixed and variable (sales-linked) components. How are lease liabilities initially measured?

A Present value of fixed payments only for non-cancellable period
B Present value of fixed payments including periods covered by reasonably certain options
C Present value of fixed + expected variable payments based on forecast sales
D Undiscounted sum of fixed payments for entire legal term
E Present value of fixed payments less initial direct costs
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