Underlying asset
The asset that is the subject of a lease — the asset the lessee has the right to use.
Definition
The underlying asset is the specific asset whose use is conveyed by a lease. For a lease to exist under IFRS 16 or FRS 102, the asset must be identified — either explicitly in the contract or implicitly because the supplier has no practical ability to substitute it.
Why it matters
If the supplier can substitute the asset and would benefit from doing so, the contract may not contain a lease. This affects whether the arrangement is recognised on the balance sheet.
In AuditLease
Each lease in AuditLease is associated with an asset class, which feeds into the ROU asset movement schedule in the statutory accounts note.
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.