IFRS 16 Lease Calculator

Annuity due · Residual value · Useful life · Variable payments · Reassessment · Full journal entries

⚠ IFRS 16.5 Exemption may apply
Lease term ≤12 months → short-term exemption available. Low-value assets (≤USD 5,000 when new) → low-value exemption. If exempt: expense payments straight-line; do not recognise ROU asset or lease liability.
Lease terms
Depreciation — IFRS 16.31
If ownership transfers or purchase option likely → use useful life (not lease term)
Deducted before straight-line: dep = (ROU − Residual) ÷ periods
ROU asset adjustments — IFRS 16.24
Advance rent / prepayment ↑ ROU ▼
Security deposit (refundable) Financial asset ▼
Non-refundable deposit ↑ ROU ▼
Lease incentives received ↓ ROU ▼
Payment tiers
Month – Pay
Month – Pay
Variable / index-linked payments — IFRS 16.38
e.g. CPI 3% per year
Lease reassessment — IFRS 16.44–46
Liability remeasured; ROU asset adjusted by same amount (IFRS 16.45–46)

Exemptions (IFRS 16.5)

  • Short-term (≤12 months at commencement): expense straight-line, no ROU/liability
  • Low-value assets (≤USD 5,000 when new): same exemption, applied lease-by-lease

Ref: IFRS 16.5–16.8

Initial measurement — lease liability (IFRS 16.26)

Annuity due: PV = PMT × [(1−(1+r)^−n)/r] × (1+r) Ordinary: PV = PMT × [(1−(1+r)^−n)/r] r = monthly IBR = annual rate ÷ 12

Ref: IFRS 16.26(b), 16.27

Initial measurement — ROU asset (IFRS 16.24)

ROU = Lease Liability + Initial direct costs + Prepayments / deposit − Lease incentives received

Ref: IFRS 16.24

Depreciation (IFRS 16.31)

Dep base = ROU Asset − Residual Value Dep period = shorter of lease term and useful life (use useful life if ownership transfers or purchase option likely to be exercised) Monthly dep = Dep base ÷ Dep period (months)

Ref: IFRS 16.29–16.35, IAS 16

Variable / index-linked payments (IFRS 16.38)

  • Initial recognition: use payments at commencement date index/rate
  • When rate/index changes: remeasure liability with revised payments & revised rate
  • Adjust ROU asset by same amount as liability change

Ref: IFRS 16.38, 16.42(b)

Reassessment (IFRS 16.44–46)

  • Trigger: lease term change, purchase option reassessment, in-substance fixed payment change
  • Remeasure liability at revised discount rate
  • Adjust ROU asset by same amount (Dr/Cr ROU vs Lease Liability)

Ref: IFRS 16.45–16.46

Lease incentives — correct journal (IFRS 16.24 & BC98)

Dr. ROU Asset [LL + IDC + Deposit − Incentives] Cr. Lease Liability [= LL] Cr. Cash (IDC + Deposit) Dr. Cash / Receivable from lessor [Incentives] Incentive reduces ROU cost directly. No separate lease incentive liability under IFRS 16.

Ref: IFRS 16.24(b), IFRS 16.BC98

Income statement (IFRS 16.49–50)

  • Depreciation → operating expenses
  • Finance cost → below EBIT (effective interest method)

Cash flows (IFRS 16.50(d), IAS 7.33)

  • Principal repayment → financing activities
  • Interest → financing or operating (accounting policy choice)
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