Right of Use Asset Calculator
Measure a lease the way IFRS 16 and Ind AS 116 ask you to. Enter the payments, term and incremental borrowing rate to get the opening lease liability, the right-of-use asset, year-one interest and depreciation, and a year-by-year schedule that runs down to zero.
Prepaid means amounts paid before the lease starts that are not part of the payment schedule above, such as an advance rent cheque. Refundable security deposits are not lease payments, so leave them out.
Incentives are larger than the rest of the asset cost, so the ROU asset is shown as zero. Check the inputs.
| Year | Opening liability | Payments | Interest | Closing liability | Depreciation | ROU closing |
|---|
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How to calculate a right-of-use asset
Start with the lease liability: the present value of the lease payments not yet paid, discounted at the rate implicit in the lease or, as most lessees do, at your incremental borrowing rate. The right-of-use asset is that liability plus a few adjustments.
The present value of payments still to be made after day one. Take the payments and dates from the signed lease deed, and the rate from treasury or your bank's term loan pricing.
Example: 59 remaining rents of ₹1,00,000 at 9% = ₹47,53,467Rent paid on the commencement date or earlier. With rent in advance, the first instalment lands here instead of in the liability.
Example: first month's rent ₹1,00,000 paid on day oneCosts you would not have paid without signing the lease, such as brokerage and stamp duty on registration. Find them in the AP ledger or the lease file.
Example: broker fee of one month's rent, ₹1,00,000The present value of what it will cost to hand the premises back in the agreed condition. It also goes in as a provision under Ind AS 37 or IAS 37.
Example: ₹3,00,000 in 5 years at 9% = ₹1,94,979Cash or cost reimbursements from the landlord, such as a fit-out contribution. A rent-free period is not deducted here, it simply lowers the payments.
Example: landlord pays ₹2,00,000 towards fit-outWhat you would pay to borrow a similar amount, for a similar term, with similar security. Divide it by payments per year for the periodic rate.
Example: 9% a year ÷ 12 = 0.75% a month| Rent, paid monthly in advance | ₹1,00,000 |
| Lease term / IBR | 5 years / 9% a year |
| PV of all 60 payments | ₹48,53,467 |
| Lease liability after day-one rent | ₹47,53,467 |
| Year 1 interest + depreciation | ₹3,95,149 + ₹9,70,693 |
| Right-of-use asset | ₹48,53,467 |
- Monthly rate: 9% ÷ 12 = 0.75%, over 60 payments
- Annuity due factor: (1 − 1.0075−60) ÷ 0.0075 × 1.0075 = 48.5347
- PV of all rents: ₹1,00,000 × 48.5347 = ₹48,53,467. Day-one rent is paid, so the liability is ₹47,53,467
- ROU asset = ₹47,53,467 + ₹1,00,000 paid on day one = ₹48,53,467, depreciated at ₹9,70,693 a year. Year 1 cost is ₹13,65,843 against ₹12,00,000 of rent
IFRS 16 and Ind AS 116 lease measurement rules
Ind AS 116 follows IFRS 16 for lessees almost word for word, so the same numbers work for an Indian parent and a Singapore or Malaysia subsidiary reporting under IFRS or MFRS 16.
| Item | Rule | What it means in practice |
|---|---|---|
| Discount rate | Implicit rate, else IBR | Lessees rarely know the landlord's implicit rate, so most use the incremental borrowing rate at commencement |
| Lease payments | Fixed, index-linked, likely options | Include fixed rent, fixed escalations, purchase or extension options you are reasonably certain to use and expected residual value guarantees. Leave out GST, maintenance and refundable deposits |
| Lease term | Non-cancellable plus likely options | Add renewal periods you are reasonably certain to take and lock-in periods, not just the first lock-in |
| ROU asset cost | Liability plus adjustments | Add day-one payments, initial direct costs and restoration cost, then subtract incentives received |
| Depreciation | Straight line, usually | Over the shorter of the lease term and useful life. Over useful life if ownership transfers or a purchase option is likely |
| Interest | Effective interest method | Constant periodic rate on the outstanding liability, so interest is highest in year one and falls each year |
| Exemptions | Short-term and low-value | Leases of 12 months or less, and low-value assets, can stay as a straight-line expense |
Summarised from IFRS 16 Leases and Ind AS 116. Variable payments not linked to an index, remeasurements and modifications are outside this calculator. This is general information, not audit advice.
Get the liability, ROU asset, interest and depreciation by year on one page.
How to keep lease accounting clean at month-end
The maths is the easy part. Most audit points on leases come from missing contracts, stale rates and changes nobody booked.
Every office, warehouse, vehicle and IT lease in one list with start date, term, rent, escalation and rate. A shared asset register template makes the ROU assets easy to track next to owned assets.
The rate depends on term, currency and security. A three-year vehicle lease and a fifteen-year warehouse should not share one rate.
Rent renegotiations, extensions and early exits mean remeasuring the liability at a revised rate. Book them in the month they are agreed.
Rent paid in the bank should match the payments in the schedule each month. Gaps usually mean an escalation or a new lease nobody told finance about.
Disclose the liability due within 12 months separately. The next year's principal from the schedule gives you the current portion.
In India rent stays deductible as paid for tax, while the books show interest and depreciation, so a temporary difference builds each year.
Frequently asked questions
Work out the lease liability as the present value of payments not yet made, discounted at the incremental borrowing rate. Then add payments made on or before the start date, initial direct costs and the present value of restoration costs, and subtract lease incentives received.
Discount each remaining lease payment at the periodic rate, which is the annual rate divided by payments per year. For rent paid in advance the first payment is made at commencement, so it sits in the ROU asset, not in the liability.
For lessees the measurement is the same. Ind AS 116 has a few carve-outs, for example on sale and leaseback and some transition reliefs, but the liability, ROU asset, interest and depreciation work the same way.
Short-term leases of 12 months or less with no purchase option, and leases of low-value assets such as laptops and small office equipment, can be expensed on a straight-line basis. The short-term choice is made by class of asset, the low-value choice lease by lease.
Depreciation is flat, but interest is charged on a liability that is largest at the start. So interest plus depreciation is above the rent in early years and below it later. Over the full term the total cost equals the payments plus initial costs less incentives.
Use the rate you would pay to borrow a similar amount over a similar term with similar security, in the lease currency. Many Indian companies start from their term loan or MCLR-linked pricing and adjust for term and security.
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