Landsdale Leasing Ltd (LLL) is the owner–lessor of some high-quality apartment blocks, which have pleasant surroundings of parks and gardens and are only a short walk to a busy shopping centre and to public transport.

In order to achieve tax benefits, the company leased all units in the blocks to its customers for a period of 20 years, requiring all customers to pay for the lease with a lump sum in advance. All units have been leased and LLL has received approximately $30 million in cash.

Since the customers (lessees) were to receive the benefits of their lease over a 20-year period, LLL decided to account for the cash received in advance as deferred lease income, and to use a straight-line basis over 20 years in order to recognise revenue. In LLL’s accounts at the end of the year, the deferred lease income was disclosed as a non-current liability.

ASIC objected to this treatment and argued that the item in question should be disclosed in the company’s statement of financial position/balance sheet not as a liability but as a separate amount after total equity.

Required

Using the Conceptual Framework as a guide, discuss whether ASIC’s proposed treatment of the $30 million in the financial reports of LLL is correct, stating your reasons. Consider also whether LLL’s program for recognising revenue is appropriate.