Right-of-Use Assets
A group, no postings. It totals leased property and equipment the company controls under long leases, as NFRS 16 requires, less their accumulated depreciation.
In detail
Right-of-Use Assets, numbered 1120, is the Fixed Asset group that totals property and equipment the company does not own but controls under a lease longer than twelve months. Under NFRS 16 such a lease is not just monthly rent: the business records an asset for its right to use the premises or machine and a matching Lease Liability for the rents it has promised, then depreciates the asset and charges interest on the liability. The group totals Right-of-Use Asset - Property and Right-of-Use Asset - Equipment less Accumulated Depreciation - Right-of-Use. Short leases and low-value items stay as Office Rent or Operating Lease Rentals. Only the auditor's lease schedule should drive these postings.
Formula
Right-of-Use Assets = Right-of-Use Asset - Property + Right-of-Use Asset - Equipment - Accumulated Depreciation - Right-of-Use.
How to record it in BRAccount
- 01Go to Accounts Setup > Chart of Accounts and expand Assets > Non-Current Assets > Right-of-Use Assets.
- 02Read the three children: two cost ledgers and one accumulated depreciation ledger.
- 03Open Financial Reports > Balance Sheet; the group shows the net book value of all long leases.
- 04To record a new lease, post to the Property or Equipment child by Journal Entry, never to this group.
- 05Compare the group total with Lease Liabilities - Non-Current and Current on the liabilities side.
When to use it
Do not post here. Use the Property or Equipment child when a lease longer than one year starts.
Example from the demo books
A three-year office lease brings a Right-of-Use Asset onto the Balance Sheet, matched by Lease Liabilities, instead of only monthly rent expense.