 A lessee is required to recognise a right-of-use asset representing its right to use the underlying

leased asset and a lease liability representing its obligation to make lease payments.
 A lessee measures right-of-use assets similarly to other non-financial assets (such as property,
plant and equipment) and lease liabilities similarly to other financial liabilities.
 A lessee recognises depreciation of the right-of-use asset and interest on the lease liability, and
also classifies cash repayments of the lease liability into a principal portion and an interest
portion and presents them in the statement of cash flows applying AASB 107.
 WHY AASB 16 :The previous accounting model for leases required lessees and lessors to classify
their leases as either finances leases or operating leases and account for those two types of
leases differently. That model was criticised for failing to meet the needs of users of financial
statements because it did not always provide a faithful representation of leasing transactions. In
particular, it did not require lessees to recognise assets and liabilities arising from operating
leases.
 This approach will result in a more faithful representation of a lessee’s assets and liabilities and,
together with enhanced disclosures, will provide greater transparency of a lessee’s financial
leverage and capital employed.
 This AASB16 set out the principles for Recognisation, Measurement, presentation and
disclosure of lease.
 Scope :
An entity shall apply this Standard to all leases, including leases of right-of-use assets in a
sublease, except for:
(a) leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources;
(b) leases of biological assets within the scope of AASB 141 Agriculture held by a lessee;
(c) service concession arrangements within the scope of Interpretation 12 Service Concession
Arrangements;
(d) licences of intellectual property granted by a lessor within the scope of AASB 15 Revenue
from Contracts with Customers; and
(e) rights held by a lessee under licensing agreements within the scope of AASB 138 Intangible
Assets for such items as motion picture films, video recordings, plays, manuscripts, patents and
copyrights.
 Short term lease and Low value lease:
If a lessee elects not to apply the requirements in paragraphs 22–49 to either short-term leases
or leases for which the underlying asset is of low value, the lessee shall recognise the lease
payments associated with those leases as an expense on either a straight-line basis over the
lease term or another systematic basis. The lessee shall apply another systematic basis if that
basis is more representative of the pattern of the lessee’s benefit.
 A contract is, or contains, a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
 Lease term : depends on lessee to
(a) Extend the lease
(b) Terminate the lease.
 Lessee Recognization:
At the commencement of date, Lessee shall recognize the right of use asset( at cost)and Lease
liability.

The cost of the right-of-use asset shall comprise:

(a) the amount of the initial measurement of the lease liability, as described in paragraph 26;
(b) any lease payments made at or before the commencement date, less any lease incentives
received;
(c) any initial direct costs incurred by the lessee; and
(d) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying
asset, restoring the site on which it is located or restoring the underlying asset to the condition
required by the terms and conditions of the lease, unless those costs are incurred to produce
inventories. The lessee incurs the obligation for those costs either at the commencement date
or as a consequence of having used the underlying asset during a particular period.