Lease Liabilities - Non-Current
Future rent you are committed to pay after twelve months under a long lease, on the Balance Sheet. The mirror of Right-of-Use Assets.
In detail
Under NFRS 16, the Nepal Financial Reporting Standard on leases, a long office or vehicle lease is not just monthly rent: the business records a Right-of-Use Asset and an equal Lease Liability for the present value of all the payments it has promised. The part of that liability payable after twelve months sits here; the next year's payments sit in Lease Liabilities - Current. Each payment is split between interest, posted to Interest on Lease Liabilities, and a reduction of the liability. Small companies that still expense rent monthly under Office Rent can leave this ledger empty, but a company audited under NFRS must use it or its Balance Sheet understates both assets and debt.
Formula
Lease liability = Present value of remaining lease payments; non-current part = total liability - payments due within twelve months
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Right-of-Use Asset - Property | Rs 8,10,000 | |
| Lease Liabilities - Non-Current | Rs 8,10,000 |
How to record it in BRAccount
- 01Compute the present value of the lease payments using the bank's incremental borrowing rate.
- 02Go to Invoicing > Journal Entry > New on the lease start date.
- 03Debit Right-of-Use Asset - Property and credit Lease Liabilities - Non-Current with that value.
- 04Submit. The entry below posts.
- 05Each month, post the payment: Dr Interest on Lease Liabilities, Dr Lease Liabilities - Current, Cr Bank.
- 06At Ashadh end, move next year's principal from this ledger to Lease Liabilities - Current.
When to use it
Post by Journal Entry when a long lease begins. Reclassify the next year's rent to Lease Liabilities - Current at year end.
Example from the demo books
Dr Right-of-Use Asset - Property Rs 8,10,000, Cr Lease Liabilities - Non-Current Rs 8,10,000 for a three-year Thamel office lease.