IFRS 16 Lease Accounting Explained: Journal Entries + Example

Understand IFRS 16 lease accounting with a worked delivery-van example. Professor Farhat calculates the lease liability, records a right-of-use asset, and explains depreciation, interest expense, and lease payments before comparing IFRS 16 with US GAAP ASC 842. This 2019 overview is for accounting students and CPA/CMA candidates studying reporting-framework differences. Use it with the study clarifications below and the standards applicable to your course or exam. CHAPTERS 00:00 Introduction and course context 01:37 Lease accounting background 02:32 Lessee, lessor and the lease contract 03:16 Historical operating leases and off-balance-sheet financing 05:43 IFRS 16 lessee model 07:05 Depreciation and interest expense 08:25 Delivery van lease example 09:09 Present value of lease payments 11:05 Initial asset and liability entry 11:38 Depreciation and first lease payment 13:03 Amortization schedule and expense pattern 15:15 IFRS 16 vs. ASC 842 16:09 US GAAP finance lease criteria 19:18 US operating lease expense comparison 20:56 Presentation and cash-flow discussion 22:27 Recap and further study THE LEASE EXAMPLE The example uses three annual payments of $60,000 at each year-end and an 8% discount rate. Their present value is approximately $154,626. With the example's assumptions, annual depreciation over the three-year lease is approximately $51,542. The first payment includes approximately $12,370 of interest and $47,630 of principal reduction. STUDY CLARIFICATIONS When is the asset and liability recognized? At lease commencement, when the lessor makes the asset available for use—not merely when the contract is signed. The right-of-use asset may also include adjustments beyond the initial liability. Are all leases treated the same under IFRS 16? IFRS 16 uses a single lessee model, with recognition exemptions for qualifying short-term and low-value-asset leases. Lessors retain finance and operating lease classifications. How does ASC 842 differ? US GAAP retains finance and operating lease categories for lessees. Operating leases generally have a single lease expense; finance leases have separate amortization and interest. The final comparison in the recording mixes the framework labels: the single operating-lease expense discussion refers to US GAAP operating leases. The historical classification percentages and simplified entries are teaching context. Use the full standard for classification, measurement, presentation and cash-flow requirements; this recording is not a comprehensive update on later amendments. Official references: IFRS 16: https://www.ifrs.org/issued-standards... FASB lease model overview: https://storage.fasb.org/FIF%20ASU%20... CONTINUE STUDYING IFRS standards playlist:    • IFRS Accounting Part 2: Provisions, Pensio...   More accounting lessons and practice resources: https://farhatlectures.com #IFRS16 #LeaseAccounting #Accounting