A lease term is based upon which three items?
Non-cancellable period, option to purchase and discount rate
Non-cancellable period, option to extend and option to terminate
Option to extend, initial direct costs and the ROU asset
Cancellable period, discount rate, option to terminate
A lease term is typically determined based on the non-cancellable period, option to extend, and option to terminate. These elements establish the overall lease obligations and potential future commitments between the lessor and lessee. The non-cancellable period refers to the fixed term of the lease, while the option to extend and option to terminate represent potential additional lease periods that depend on the lessee's decision to exercise those options. The discount rate, though important for calculating lease liabilities, is not directly part of defining the lease term but rather influences the measurement of lease obligations.
