Restoration provision
An estimated liability for costs to restore a leased asset to its original condition at the end of the lease.
Definition
Where a lease requires the lessee to restore the underlying asset to its original condition on return — for example, removing leasehold improvements — a provision should be recognised at commencement. The estimated cost is included in the initial measurement of the right-of-use asset and a corresponding provision is recognised.
Why it matters
Restoration provisions can be material for property lessees who make leasehold improvements. The provision must be estimated, discounted if material and long-term, and reviewed at each period end.
In AuditLease
AuditLease allows a restoration provision to be entered per lease. It is added to the initial ROU asset cost and included in the amortisation calculation.
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.