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Advise the directors on how to treat the item

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Question: Tim has entered into two new long lease property agreements for two major retail outlets. Annual rentals are paid under these agreements. Tim has had to pay a premium to enter into these agreements because of the outlets' location. Tim feels that the premiums paid are justifiable because of the increase in revenue that will occur because of the outlets' location. Tim has analyzed the leases and has decided that one is a finance lease and one is an operating lease but the company is unsure as to how to treat this premium. Advise the directors on how to treat the above item.

Reference no: EM132717980

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