a leasee’s initial measurement calculation for a right-of-use asset under AASB 16: Leases.
Question
a leasee’s initial measurement calculation for a right-of-use asset under AASB 16: Leases.
Solution
Under AASB 16: Leases, a lessee's initial measurement of a right-of-use (ROU) asset involves several steps:
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Identify the Lease: The first step is to identify the lease agreement and ensure it meets the definition of a lease under AASB 16. This means the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
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Determine the Lease Term: The lease term is the non-cancellable period for which the lessee has the right to use the underlying asset, together with periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
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Calculate the Lease Liability: The lease liability is the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the lessee’s incremental borrowing rate.
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Measure the Right-of-Use Asset: The ROU asset is initially measured at cost, which includes the initial amount of the lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received, plus any initial direct costs incurred by the lessee.
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Record the Right-of-Use Asset and Lease Liability: The lessee then records the ROU asset and the lease liability on the balance sheet at the commencement date of the lease.
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Subsequent Measurement: After the commencement date, the lessee measures the ROU asset using a cost model (less any accumulated depreciation and any accumulated impairment losses) and measures the lease liability by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made, and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments.
By following these steps, a lessee can accurately measure a right-of-use asset under AASB 16: Leases.
Similar Questions
According to AASB 16 Leases a right-of-use asset is required to be. A depreciated over the lease term, where the cost of the right-of-use lease asset reflects that the lesseewill exercise the purchase option at end of the lease termo B depreciated over the underlying asset's useful life, where the cost of the lease asset reflects that thelessee will exercise the purchase option at end of the lease termo C depreciated over the longer of the lease term and its useful life of the right-of-use lease asset, wherethe lessee will not obtain ownership at the end of the lease termo D depreciated from lease commencement to the longer of the lease term and its useful life, only wherethe economic benefits to be realised from using the asset are for a period of greater than ten years
Which of the following statements is not correct in accordance with the requirements of AASB 16 Leases? Group of answer choices The commencement of the lease is the date from which the lessee is entitled to exercise its right to use the underlying asset. After initial recognition, right-of-use assets are depreciated. The lease liability recognised at the commencement of the lease term represents the present value of future lease payments. A right-of-use asset is required to be depreciated over the lease term, where the cost of the right-of-use lease asset reflects that the lessee will exercise the purchase option at end of the lease term.
The new accounting standard for leases, AASB 16/IFRS 16, has introduced:
Which of the following BEST DESCRIBES the elements that should be considered when assessing whether a contract contains a lease arrangement under AASB 16 Leases? a) The underlying asset is clearly identified, the lessee has a right to control the underlying asset and is entitled to substantially all of the underlying asset’s economic benefits Correct! b) The underlying asset is clearly identified, the lessee has a right to control the use of underlying asset and is entitled to substantially all of the underlying asset’s economic benefits
Which of the following statements is correct in accordance with AASB 16 Leases?Group of answer choicesVariable lease payments may be increased or decreased during the lease term because of changes in facts and circumstances occurring after the asset is made available to the lessee to use, other than the passage of time.Payment for executory costs reimbursed by the lessee after being paid by the lessor on behalf of the lessee are included in the calculation of lease payments.Right-of-use asset is depreciated from lease commencement to the longer of the lease term and its useful life, only where the economic benefits to be realised from using the asset are for a period of greater than ten years.Payments that are made by a lessee at commencement date are included in the initial amount recognised for the lease liability.
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