Right-of-use (ROU) asset
In one sentence
A right-of-use asset is the lessee's right to use a leased asset over the lease term, recognised on the balance sheet at the lease liability plus prepaid payments and initial direct costs, less incentives.
Under ASC 842 and IFRS 16, a lessee capitalises a right-of-use (ROU) asset representing its right to use the underlying asset for the lease term. It is measured at commencement as the initial lease liability, plus any lease payments made at or before commencement and initial direct costs, minus any lease incentives received. The ROU asset is then amortized over the lease term.
Cite: ASC 842-20-30-5 / IFRS 16.24
Lease liability
The lease liability is the present value of the remaining lease payments, discounted at the rate implicit in the lease or the lessee's incremental borrowing rate.
Read definition →Initial direct costs
Initial direct costs are incremental costs of obtaining a lease that would not have been incurred if the lease had not been obtained — they are added to the right-of-use asset.
Read definition →Lease incentive
A lease incentive is a payment made by the lessor to or on behalf of the lessee, such as a tenant improvement allowance or rent-free period, that reduces the right-of-use asset.
Read definition →See Right-of-use asset in a real calculation
Enter a lease and Ledgerage computes it — every figure traced back to the standard.