Right-of-use asset

A right-of-use asset is the balance-sheet asset a lessee recognises under a lease, measured at the present value of future lease payments plus initial direct costs and depreciated over the lease term.

ByHoang TruongUpdated July 3, 2026

FrameworkIFRS 16

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The right-of-use asset stacks four components at lease commencement: the present value of the lease liability, €180,000; initial direct costs, €5,000; prepayments, €3,000; and a restoration obligation, €2,000. Together they total €190,000, the amount capitalised on the balance sheet and then depreciated over the shorter of the lease term and the asset's useful life.

Where it fits

SubjectFinancial AccountingAdvancedTopicAsset Measurement & ValuationAdvanced

The formula

LaTeX

\text{ROU Asset} = \text{Lease Liability}_0 + \text{Initial Direct Costs} + \text{Prepayments} + \text{Restoration}

Variables

$L e a se L iabi l i t y_{0}$: Initial lease liability recognised at commencement (€)
$I ni t ia l D i r ec tC os t s$: Incremental costs incurred in obtaining the lease (€)
$P r e p a y m e n t s$: Lease payments made at or before commencement (€)
$R es t or a t i o n$: Estimated cost of restoring the underlying asset at end of the lease term (€)

Initial measurement of the right-of-use asset at the lease commencement date; subsequently depreciated over the shorter of the lease term and the asset's useful life.