IFRS 16 Lessee Accounting Example 1
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Hiruy Gizachew
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IFRS 16 is an International Financial Reporting Standard promulgated by the International Accounting Standards Board providing guidance on accounting for leases. IFRS 16 was issued in January 2016 and is effective for most companies that report under IFRS since 1 January 2019.
IFRS 16 defines a lease term as the noncancellable period for which the lessee has the right to use an underlying asset including optional periods when an entity is reasonably certain to exercise an option to extend (or not to terminate) a lease.
IFRS 16 requires that the 'right of use asset' and the lease liability should initially be measured at the present value of the minimum lease payments. The discount rate used to determine present value should be the rate of interest implicit in the lease.
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