Restoration asset
The component of the right-of-use asset representing a capitalised restoration or make-good obligation recognised at lease commencement.
Definition
When a lessee recognises a restoration provision at commencement — reflecting the estimated cost of returning the leased asset to its original condition — a corresponding amount is added to the right-of-use asset. This element of the ROU asset is sometimes called the restoration asset component. It is depreciated over the lease term alongside the rest of the ROU asset, while the provision itself is unwound using interest accretion at the discount rate. The net effect is that the cost of the make-good obligation is recognised over the lease term rather than in a lump sum at the end.
Why it matters
Understanding the restoration asset component is important for accurate ROU asset analysis, particularly when reviewing movements in the ROU asset between periods in the statutory note.
In AuditLease
AuditLease incorporates the restoration provision into the initial ROU asset calculation and displays the total ROU asset (including this component) in the amortisation schedule.
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.