Security devices Inc. needs additional office space to accommodate expansion. SDI wants to avoid income statement effects that would disrupt its attempt to smooth income over time.

1. Which lease classification would management prefer? Explain.

2. Would meeting SDI's reporting objective be more or less difficult under IFRS? Explain.

3. Does SDI's reporting objective pose an ethical dilemma? Why?

Be sure to support and explain your answers.

4. Who may be affected by SDI's reporting objective? Why?