What are some examples of IFRS lease accounting?

What are some examples of IFRS lease accounting?

IFRS lease accounting primarily involves recognizing leases on the balance sheet. For example, if a company leases a building for 10 years, it must recognize both a right-of-use asset and a lease liability.

Can you explain how to calculate the lease liability?

Certainly! The lease liability is calculated as the present value of future lease payments. You discount these payments using the interest rate implicit in the lease or the company's incremental borrowing rate.

What about the right-of-use asset?

The right-of-use asset is initially measured at the amount of the lease liability plus any initial direct costs and any lease payments made at or before the commencement date.

Are there different types of leases under IFRS?

Yes, under IFRS 16, leases are classified as either finance leases or operating leases, with specific accounting treatments for each.

Can you give me a real-world example?

Sure! A company leasing office space would recognize the lease as a right-of-use asset and a corresponding lease liability on its balance sheet, reflecting the total lease payments discounted.