Right-of-Use Asset
A right-of-use (ROU) asset represents a lessee's right to use an underlying asset for the lease term. Lessees recognize it, together with a lease liability, at the commencement of a lease.
Leasing
Explanation
At initial measurement, the ROU asset generally equals:
• the initial amount of the lease liability,
• plus lease payments made at or before commencement,
• plus initial direct costs incurred by the lessee,
• minus lease incentives received.
Under IFRS 16, estimated costs for dismantling or restoring the asset are also included.
Subsequent measurement depends on the framework and classification:
• ASC 842 finance leases and IFRS 16: the ROU asset is amortized or depreciated, generally on a straight-line basis.
• ASC 842 operating leases: the ROU asset is measured as a balancing figure so that total lease cost is recognized on a straight-line basis.
ROU assets are subject to impairment testing and are adjusted when the lease liability is remeasured.
Why It Matters
ROU assets bring leases onto the lessee's balance sheet. In SAP, they are typically calculated in SAP Contract and Lease Management (CLM) and integrated with asset accounting.
Related Terms
Lease Liability · Lessor / Lessee · ASC 842 · IFRS 16 · Initial Direct Costs · Lease Term
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