will introduce one accounting model for lessee which will require a lessee to
acknowledge asset as well as liabilities in terms of all leases with a period
of over 12 months, except when the underlying asset has low value. It will be
compulsory for a lessee to acknowledge a right of use asset that represent
their right to use the underlying leased asset as well as a liability of the
lease that represent the responsibility in making lease payments.
A lessee will measure the right-of-use asset
in a similar way to other non-financial assets such as PPE, and will also
measure the lease liabilities in a similar way to other financial liabilities.
As a result, lessees will recognize depreciation for the right-of-use of the
asset as well as the interest on the lease liability. The depreciation will
normally be calculated in a straight-line basis.
Assets as well as liabilities that arise from
a lease are originally calculated on a basis of present value. This kind of
measurement will normally include lease payments that are non-cancellable, as
well as will include the payments that are to be made in certain or optional
periods if, or when the lessee is rationally certain that the option to extend
the lease is going to be exercised, or the option to terminate the lease is not
going to be exercised. In most cases, the original lease asset will equal to
the lease liability.
In the statement of financial statement,
under AASB 16, businesses must present the lease asset as part of PPE or they
must present it as its own item.