Lease payments are discounted at the interest rate implicit in the lease or, if that rate cannot be determined, at the lessee's incremental borrowing rate. Index-linked rent increases and extension options affect the measurement.
The lease liability may be taken into account in leverage calculations under loan agreements, so it is important to review covenant calculations.
Source: TFRS 16
Related terms
Leases (TFRS 16)The standard requiring lessees to present almost all leases in the statement of financial position as a right-of-use asset and a lease liability.Right-of-use assetAn asset representing the lessee's right to use the leased asset over the lease term.Net debtFinancial debt and similar liabilities less cash and cash equivalents.Accounting policiesThe specific principles, bases, conventions, rules and practices an entity applies in preparing its financial statements.Amortised costThe amount at which a financial asset or liability is measured at initial recognition, minus principal repayments, plus cumulative amortisation calculated using the effective interest method.AssociateAn entity over which the investor has significant influence but not control or joint control.
Last updated: October 22, 2026 · This definition is for general information only.