## Lease measurement under AASB 16

The initial lease liability is the present value of five annual payments of $25,000, discounted at the lessee’s incremental borrowing rate of 7%:

\[
\begin{aligned}
\text{Lease liability}
&= \sum_{t=1}^{5}\frac{\$25{,}000}{(1.07)^t}\\
&= \$25{,}000 \times \frac{1-(1.07)^{-5}}{0.07}\\
&= \$25{,}000 \times 4.1001974359\\
&= \boxed{\$102{,}504.94}
\end{aligned}
\]

Because there are no initial direct costs, lease incentives, prepaid payments, or restoration costs, the initial right-of-use asset equals the initial lease liability:

**(a) Initial lease liability:** **$102,504.94**  
**(b) Initial right-of-use asset:** **$102,504.94**

**Governing accounting standard:** **AASB 16 _Leases_**.