Suppose the same facts as above, except that Kimberly-Clark incurred legal fees resulting from the execution of the lease of $5,000, and received a lease incentive from Sheffield to enter the lease of $1,000. How would the initial measurement of the lease liability and right-of-use asset be affected under this situation

Kimberly-Clark

The initial measurement of the lease liability and the right-of-use asset would not be affected under this situation.

Explanation:

a) Data:

Legal fees resulting from the execution of the lease = $5,000

Incentive received from Sheffield to enter the lease = $1,000

b) The legal fees will be expensed, while the lease incentive will be recorded as income.  Legal fees paid to professionals for lease agreements can be deducted as operating expenses.  In this situation, the legal fees can be reduced by the lease incentive received from the lessor.

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