A right-of-use (RoU) asset represents the lessee’s right to use an underlying asset during the Lease term recognized on the balance sheet. The right-of-use asset is calculated as the initial amount of the lease liability (see Liability ), plus any lease payments made to the lessor before the start date of the lease, plus any initial direct costs incurred, plus the present value of the restoration costs minus any lease incentives received.

Under IFRS 16, the system depreciates the RoU asset over the shorter of the lease term or the economic life of the asset, unless the lease includes a purchase option or transfers ownership. If the economic life is shorter than the lease term, depreciation is based on the economic life.

If the RoU asset becomes impaired, the system records the impairment immediately. This reduces the asset’s carrying amount. The system then calculates subsequent depreciation based on the adjusted carrying amount.

When the lease ends, the system removes the RoU asset and the related lease liability from the balance sheet. Any difference between the two amounts is recognized as profit or loss.