Interest expense
The finance cost recognised each period on the lease liability, calculated using the effective interest method.
Definition
Interest expense is the periodic unwinding of the discount on the lease liability. It is recognised in the income statement as a finance cost. Under IFRS 16, it is separately disclosed from depreciation of the ROU asset.
Why it matters
Interest expense on leases now appears in finance costs rather than operating costs. This increases EBITDA and EBIT but reduces interest cover ratios. It is a required separate disclosure in the statutory note.
In AuditLease
AuditLease calculates and reports interest expense per lease and in aggregate in the period-end report and statutory note P&L charges section.
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.