Lease with purchase option

[Giannos]

Hello,

A company leased a building for a period of 12 months with the option to purchase it at a specific price on the expiration of the 12 months.
It is virtually certain that the purchase option will be exercised. The company gave also a non refundable deposit of 5 million at the commencement off the lease agreement.
As I know, both the initial deposit of 5 million as well as the leased payments and the purchase price should be included in the Right of Use since the exercise of the purchase option is almost certain.
My question is how the purchase of the building will be recognized in the books at the expiration of the leasing period of 12 months.
Shall I simply reclassify the amount of the right of use and of the carrying amount of its accumulated depreciation from Right of use assets to PPE?
or
I should derecognize the right of use asset and recognize the PPE based on the purchase option exercise price and posting the differences to P&L?

Thank you

[Ketan Marwah]

reclassify the amount of the right of use and of the carrying amount of its accumulated depreciation from Right of use assets to PPE?

Hi, the former (what I have quoted from your question).

[Giannos]

Thank you!