Prompt
We’re a company based in Dubai. We just signed a five-year office lease at AED 240,000 a year, paid at the end of each year. Our incremental borrowing rate is 6%. How should we account for it?
Model response confidence: high
Under ASC 842, this is an operating lease. You should recognize a straight-line rent expense of AED 240,000 per year over the lease term. Because it is classified as an operating lease, no liability is recorded on the balance sheet; the future payments are disclosed as commitments in the notes.
Rubric
- Framework identifiedFail
- Recognition modelFail
- MeasurementMissing
- Year-one expenseWrong
- ClarityPass
Verdict
CriticalLeaves ≈ AED 1,010,967 of lease liability off the balance sheet.
- Reference answer + rationale → training set
- Failure pattern → benchmark