I am unable to identify whether a particular lease given in a question is operating or finance. The descripttion is as follows:
"XYZ Corp. agreed to lease a land to ABC Corp. for a period of 20 years. The base rent is $5 million. There would be a 9% increase in the base rent every 5 years. Provided there is no default in payment of rent, the tenant would have an option to extend the lease for another 10 years."
Its Operating Lease.........
Refer: finance-lease-vs-operating-lease
Thank you for helping me Sir.
Can I know which main feature of this agreement makes us realise it is an operating lease?
1. Residual Value.......
2. Ratio of life period of the leased object and lenth of lease.
CCI
Pro
CAclubindia
