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Hello Sir,
Could you please explain why ”right of use asset” contains the amount of the initial measurement of the lease liability?
Thank you.
Start of lease – decide what you are paying in present value terms
Then Dr Right of Use Asset Cr Lease liability with that amount.
The liability is fairly stated and we have show the asset at something!
So we use the same figure as the liability
You may find it useful to refresh your lessee accounting using our FR lecture – the SBR lecture is more about lessor and sale and leaseback
Okay.. Sir, my question is that why is liability a part of right of use asset? I don’t understand the logic behind liability being part of an asset cost, please?
You have to measure the asset at something. Cost means the money that we have paid and will have to pay. So we use the related liability.
No different to buying any asset on credit.
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