Lease liability
The present value of future lease payments that the lessee is obligated to make under the lease.
Definition
The lease liability is recognised at the commencement date and measured at the present value of lease payments not yet made, discounted at the rate implicit in the lease or — if not readily determinable — the lessee's incremental borrowing rate. The liability is then reduced over time as payments are made and increased by the interest charge each period using the effective interest method.
Why it matters
The lease liability is a new balance sheet obligation for most businesses. It must be split between current (due within 12 months) and non-current portions in the statutory accounts. It is one of the most scrutinised audit areas for IFRS 16 and FRS 102.
In AuditLease
AuditLease calculates the initial lease liability, produces the amortisation schedule, splits the closing balance into current and non-current, and generates the lease liability movement note for the statutory accounts.
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.