IFRS 16 Lease Calculator

• What is a leaseA contract that gives you the right to control the use of an identified asset for a period of time, in exchange for payment.
• One model for lesseesThe old split between operating and finance leases is gone for lessees. You recognise a right-of-use asset and a lease liability. Lessors still classify leases as operating or finance.
• Two optional exemptionsShort-term leases (12 months or less, with no purchase option) and leases of low-value assets, such as laptops or phones, can stay off the balance sheet and be expensed.
• Lease liabilityThe present value of the lease payments not yet paid, discounted at the rate implicit in the lease or, if that cannot be found, the lessee's incremental borrowing rate.
• Right-of-use assetThe lease liability, plus payments made at or before the start, plus initial direct costs and restoration costs, minus lease incentives received.
• After day oneInterest is charged on the liability and it falls as payments are made. The asset is depreciated, usually straight line over the shorter of the lease term and the asset's useful life.
• Effect on the accountsRent expense is replaced by depreciation and interest. Total cost is higher in the early years and lower later, and EBITDA goes up. Repayments of the liability's principal are shown as financing cash flows.
• Later changesThe liability is remeasured when the lease term changes, when index-linked payments change, or when the lease is modified, with a matching adjustment to the asset.
• Key disclosuresA maturity analysis of lease liabilities, the right-of-use assets by class, interest on lease liabilities, short-term and low-value lease expense, and total cash paid for leases.

This calculator covers a lessee's lease with fixed payments: initial measurement, the liability and asset schedules, journals and the maturity analysis.