Nice try! There is no requirement for an operating lease to include a prepayment penalty in the lease term to be disclosed as a noncash activity. Operating leases must never be disclosed as noncash transactions.
When an agency enters into an operating lease, it does not record the related asset on its financial statements. Therefore, it does not meet the criteria for a noncash transaction which are:
- the transaction must be noncash
- the transaction must affect noncash assets or liabilities
- the transaction must fit the definition of capital, financing or investing activities
See Noncash Activities for further review.
