Leased Assets and Right-of-Use (ROU): Ind AS 116 Depreciation and Lease Liability Amortization

The Era of On-Balance-Sheet Leases

Under Ind AS 116 (and IFRS 16), operating leases for corporate offices, retail stores, and commercial vehicle fleets can no longer be treated as simple off-balance-sheet rent expenses. Lessees must recognize a 'Right-of-Use (ROU) Asset' alongside a corresponding 'Lease Liability' on day one.

Dual Schedule Mechanics

• ROU Asset: Depreciated on a straight-line basis over the lease term or economic life of the underlying asset.
• Lease Liability: Amortized using the effective interest rate method, recognizing finance costs over the payment tenure.

Relaso Fixed Asset & Lease Module generates amortization schedules, tracks lease modifications/escalations, and auto-posts monthly ROU depreciation journals.