Non-lease component
A component of a contract that provides goods or services separately from the right to use an underlying asset.
Definition
Lease contracts often include services or other elements alongside the right to use an asset — such as a service charge, insurance, or maintenance. Under IFRS 16, these non-lease components should generally be separated from the lease component and excluded from the lease liability measurement. FRS 102 provides a practical expedient allowing lessees not to separate lease and non-lease components.
Why it matters
Correctly identifying and separating non-lease components reduces the lease liability. However, the separation requires judgement and supporting analysis. Many entities use the practical expedient to avoid the complexity.
In AuditLease
AuditLease captures the lease-vs-non-lease treatment alongside the lease, with the supporting judgement recorded in the audit trail.
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.