# Lease Measurement — AASB 16

## Working

**Initial lease liability** = present value of the 5 annual payments of $25,000, discounted at 7%:

$$\text{Liability} = \sum_{t=1}^{5} \frac{25{,}000}{(1.07)^t} = 25{,}000 \times \frac{1 - (1.07)^{-5}}{0.07}$$

Step-by-step:

- $(1.07)^5 = 1.4025517307$
- $(1.07)^{-5} = 0.7129861794$
- Annuity factor $= \dfrac{1 - 0.7129861794}{0.07} = \dfrac{0.2870138206}{0.07} = 4.1001974366$
- Liability $= 25{,}000 \times 4.1001974366 = 102{,}504.9359$

## Answers

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

(The ROU asset equals the initial lease liability because there are no initial direct costs, lease incentives, prepaid payments, or restoration costs.)

## Governing standard

**AASB 16 *Leases*** (the Australian equivalent of IFRS 16 *Leases*).