Lease Accounting Schedule (ASC 842 / IFRS 16)

How to use it

Enter the fixed payment, the term, when payments fall and the discount rate, then pick the standard. The calculator measures the lease liability and right-of-use asset at commencement and rolls both forward, showing the expense each year would put through the P&L.

Where the number comes from

• The monthly rate is the annual discount rate divided by twelve.
• The lease liability is the present value of the payments not yet made at commencement. Paid in advance, the first payment is made on day one, so the liability covers the rest and that first payment is added to the asset.
• The right-of-use asset is the liability, plus any payment made on day one, plus initial direct costs, less incentives received.
• Each month the liability grows by interest at the monthly rate and falls by the payment. Total interest is the payments after day one less the liability they started as.
• IFRS 16 depreciates the asset straight-line over the term, so expense is interest plus a level depreciation charge, heavier at the start.
• An ASC 842 operating lease books one straight-line cost: total payments plus direct costs less incentives, spread evenly. The asset falls by that cost less the month’s interest.

What goes wrong

The part most calculators leave out.

• The discount rate drives everything. A point higher shrinks the liability and the asset, and shifts expense between years; an incremental borrowing rate is an estimate, and auditors will ask how you set it.
• Variable payments linked to sales or usage are left out of the liability under both standards and expensed as they fall due. Payments linked to an index are included at today’s rate and remeasured when the index moves; this schedule does neither.
• Renewal, termination and purchase options change the term. Including an extension you are not reasonably certain to take, or leaving out one you are, changes every figure here.
• The short-term exemption (12 months or less) and the IFRS 16 low-value exemption are not applied. Leases that qualify can be expensed straight-line with nothing on the balance sheet.
• Months are treated as equal periods. Real leases start mid-month, escalate annually and include rent-free periods, which a level payment does not capture.
• ASC 842 finance leases follow the IFRS 16 pattern, not the operating one. Classifying the lease correctly is a separate test this calculator does not run.

Questions

Why is the liability lower when I pay in advance?

Because the first payment is made on day one and is no longer owed. It goes into the right-of-use asset instead, so the asset is the same size either way while the liability covers one payment fewer.

Why does IFRS 16 expense more in the early years?

Interest is charged on the outstanding liability, which is largest at the start and falls as payments are made, while depreciation stays level. The sum is front-loaded. Total expense over the lease is the same as a straight-line charge.

What discount rate should I use?

The rate implicit in the lease if it can be readily determined, which it rarely can for a lessee. Otherwise your incremental borrowing rate: what you would pay to borrow a similar amount, over a similar term, with similar security.

Does an operating lease under ASC 842 still go on the balance sheet?

Yes. Both the liability and the right-of-use asset are recognised. What differs from IFRS 16 is the P&L: one straight-line lease cost instead of separate interest and depreciation.

Does anything I type get sent anywhere?

No. The whole calculation runs in your browser. Nothing is sent to us or logged, and there is no account to create. Your browser keeps the figures with this tab’s history so that Back and Reload bring them back, and Reset clears them.