Which elements are introduced on the balance sheet under IFRS 16?

Which elements are introduced on the balance sheet under IFRS 16?

• A. A right-of-use asset and a lease liability
• B. Only a lease expense
• C. Only depreciation expense
• D. Only a note disclosure

Answer: (A)

Under IFRS 16, lessees bring both a right-of-use asset and a lease liability onto the balance sheet for most lease contracts. The right-of-use asset reflects the lessee’s legal right to use the underlying asset during the lease term, while the lease liability represents the present value of future lease payments the lessee must make. These two items sit on the balance sheet from initial recognition and are then measured over time: the asset is depreciated, and the liability accrues interest while lease payments reduce the liability. This contrasts with options that would only show expenses or notes; the standard requires balance sheet recognition for most leases (with some exemptions for short-term or low-value leases).

Under IFRS 16, lessees bring both a right-of-use asset and a lease liability onto the balance sheet for most lease contracts. The right-of-use asset reflects the lessee’s legal right to use the underlying asset during the lease term, while the lease liability represents the present value of future lease payments the lessee must make. These two items sit on the balance sheet from initial recognition and are then measured over time: the asset is depreciated, and the liability accrues interest while lease payments reduce the liability. This contrasts with options that would only show expenses or notes; the standard requires balance sheet recognition for most leases (with some exemptions for short-term or low-value leases).