What does the gross investment of the lease represent?

The gross investment of the lease represents the total amount that the lessor expects to receive over the term of the lease, which includes all the lease payments due from the lessee and any guaranteed residual values at the end of the lease term.

In the context of leasing, the guaranteed residual value refers to the value that is contractually assured and that the lessor expects to realize from the leased asset at the end of the lease period. This value adds to the total gross investment as it reflects the amount that the lessor can expect to recover, enhancing the overall value of the lease arrangement.

This understanding is crucial for accurately assessing the financial implications of leasing agreements and helps in financial reporting, particularly when determining lease liabilities and assets on corporate balance sheets. The focus on guaranteed values aligns with accounting practices outlined in standards such as IFRS 16, which governs how leases should be recorded and reported.

On the other hand, while other options touch on aspects of lease accounting or financial flows, they do not fully encapsulate the comprehensive nature of gross investment that includes guaranteed residuals, making this answer the most appropriate choice in the context provided.