Question

iii) Tyre has entered into two new long lease property agreements for two major retail outlets. Annual rentals are paid under these agreements. Tyre has had to pay a premium to enter into these agreements because of the outlets' location. Tyre feels that the premiums paid are justifiable because of the increase in revenue that will occur because of the outlets location. Tyre has analysed 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. Required: Advise the directors on how to treat the above item.

Answer 1

A PLC is an additional cost that a buyer pays, for choosing a better location in an apartment complex. Hence, for example, to own an apartment that overlooks a park or is a corner plot, the buyer pays extra. “While, in Mumbai, people pay higher PLCs to stay on the top floor, people in Delhi pay higher PLCs for apartments in the ground floor,

PLC is charged on a per sq ft basis, on the super built-up area of the apartment. Typically, each floor has a different PLC.