Under Ind AS 116, 'Leases', which of the following is NOT included in the initial measurement of the Right-of-Use (ROU) Asset by the lessee?
Select Your Answer (Keyboard: A, B, C, D)
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Financial Reporting (Ind AS)MCQQuestion 5862 of 507
All Questions Correct Answer
✅ Option D — General corporate overheads allocated to the lease negotiation process
All Options:
- AInitial measurement of the lease liability
- BLease payments made at or before the commencement date, less any lease incentives received
- CInitial direct costs incurred by the lessee
- DGeneral corporate overheads allocated to the lease negotiation process ✓
Detailed Solution & Explanation
Under Paragraph 24 of Ind AS 116:
1. The cost of the **Right-of-Use (ROU) asset** comprises:
2. Under Appendix A, **Initial Direct Costs** are defined as incremental costs of obtaining a lease that would not have been incurred if the lease had not been obtained.
3. General corporate overheads, advertising, and salaries of internal legal counsel are not incremental and cannot be capitalized.
Hence, **Option D** is the correct answer.
1. The cost of the **Right-of-Use (ROU) asset** comprises:
2. Under Appendix A, **Initial Direct Costs** are defined as incremental costs of obtaining a lease that would not have been incurred if the lease had not been obtained.
3. General corporate overheads, advertising, and salaries of internal legal counsel are not incremental and cannot be capitalized.
Hence, **Option D** is the correct answer.
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