Question

Under IFRS, initial direct costs at lease inception

A) Rights and Obligations
B) Valuation or Allocation
C) Completeness
D) Existence

Answer 1

Under IFRS, initial direct costs at lease inception are considered part of Valuation or Allocation since they are directly attributable to arranging the lease and are amortized over the lease term.

Step-by-step explanation:

The question pertains to how initial direct costs are accounted for at lease inception under the International Financial Reporting Standards (IFRS). In practice, initial direct costs are added to the carrying amount of the leased asset and amortized over the lease term.

This is because they are directly attributable to negotiating and arranging the lease, and under IFRS, such costs are included in the Valuation or Allocation category for financial reporting. Therefore, the correct answer to the question is B) Valuation or Allocation.