IFRS 16Chapter 7Lesson 1
Lessee after the commencement date: lease liability and right-of-use asset
Step 1 of 8Learning objectives
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After the commencement date, two independent mechanisms run in parallel: the lease liability follows an amortisation schedule (interest at a constant rate, payments reducing it) and the right-of-use asset is depreciated under IAS 16 over a period set by IFRS 16, para. 32, subject to IAS 36 and the other models. Transvia example over 5 years, year 1 entries.
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Learning objectives
- Build the amortisation schedule of the lease liability: interest at a constant periodic rate, payments, balance.
- Identify the lessee's expenses in profit or loss (interest, variable payments not included, depreciation).
- Determine the depreciation period of the right-of-use asset and calculate its carrying amount.
- Spot when IAS 36, the IAS 40 fair value model or the IAS 16 revaluation model apply.
- Record the year-end entries and explain why the total expense is higher at the start of the lease.