Is a guaranteed residual value included in the capitalization of the leased asset?

A guaranteed residual value is not included in the capitalization of the leased asset because it does not represent an expenditure necessary to acquire the asset or to prepare it for its intended use. In lease accounting, the driving principle is to recognize only those costs that directly relate to the initial outlay for the asset being leased.

The guaranteed residual value is considered a future value that the lessee expects the asset to be worth at the end of the lease term, guaranteed by the lessor. While it affects the overall economics of the lease transaction and can influence the decision-making process regarding lease terms and costs, it does not form part of the asset's initial cost recorded on the lessee's balance sheet. The asset is capitalized at its present value, determined by the lease payments and any initial direct costs incurred, but it excludes elements like guaranteed residual value that aren’t part of the direct acquisition cost or necessary to prepare the asset for use.

Therefore, when considering how to treat the guaranteed residual value in accounting, it's essential to focus on the definition of capitalized costs and the principles behind asset valuation under lease accounting standards.