[Anonymous]

I know for GAAP Direct Costs for a lease go: Lease payments pv will be 317,000 and pay 3,000 in direct costs:

Dr. Asset under Lease 320,000

Cr. Obligation under lease 317,000

Cr. Cash 3,000

Someone had mentioned to know how to handle direct costs under IFRS. Can someone elaborate on this? Thanks in advance.

[WanderingAcct]

The journal entry you showed is the journal entry you would do under IFRS. Under IFRS the lessee capitalize their initial direct costs as part of the asset and depreciates them over the life of the lease. Hence why the asset is $3000 more than the liability – it includes the $3000 of capitalized direct costs.

For US GAAP you would expense the initial direct costs. So the JE is:

Dr. Leased Asset 317000

Cr. Lease Liability 317000

Dr. Expense 3000

Cr. Cash 3000

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[Anonymous]

Thanks for clearing this up!

And do you have any examples of direct costs for this?

[Author]

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