Initial measurement
The calculation of the lease liability and right-of-use asset values at the commencement date.
Definition
Initial measurement is the process of calculating the starting values for the lease liability and ROU asset at the lease commencement date. The lease liability equals the present value of future lease payments discounted at the applicable rate. The ROU asset starts at the same amount, adjusted for prepayments, initial direct costs, and restoration provisions.
Why it matters
Getting initial measurement right is critical — errors compound over the life of the lease through the amortisation schedule. The discount rate choice has the largest single impact on initial values.
In AuditLease
AuditLease performs the initial measurement calculation automatically from the lease terms and discount rate entered by the user.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence — so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.