Abc signed a 5-year operating lease agreement whereby wxy rentals will provide a truck which cost wxy $20,000. The lease payments are $2,500, payable at the end of each year. The truck will revert to wxy at the end of five years. The truck has a 10-year useful life. At the inception of the lease, what should abc do
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As per some opinion, no record need to be made. This expense wouldn't be recognized and the expense at inception and the rest will be related to capital leases.
It also appears to be an operating lease so need to be expended and therefore, no journal entry needs to be made at inception.
In case IFRS rule is applicable, disclosure in notes may be needed unless it would prejudice that will outcome. It is Probable to provide and disclose the reason for provision.
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