Calculation of the value of the right to use an asset and lease liabilities in accordance with IFRS 16

IFRS 16 requires the Company to recognize all leases in the lessee's balance sheet, except for short-term leases and low value items. In the financial statements prepared in accordance with the International Accounting Standards, an entity recognizes a right to use an asset and a lease liability in its balance sheet.

The following steps must be taken in order to calculate the value of the right to use and the liability correctly:

  • Consider which contracts are subjected to the standard and which regular payments should be taken into account in the calculation.
  • Summarize relevant data from leasing contracts into a clear and uniformly structured table.
  • Make a judgment about the lease term, considering the notice period and the option to extend or shorten it.
  • Take into consideration changes in contracts recorded in the previous accounting period.
  • Choose the appropriate discounting method.
  • Calculate the value of the right of use and the related liability and prepare accounting entries to be reflected in the financial statements.

We can help you in all above mentioned steps.