# Lease Measurement Under AASB 16

## Governing Standard

**AASB 16 *Leases*** (equivalent to IFRS 16) governs the recognition and measurement of right-of-use assets and lease liabilities for lessees.

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## Working

### Step 1 – Compute each discounted cash flow

$$PV = \sum_{t=1}^{5} \frac{25{,}000}{(1.07)^t}$$

| Year (*t*) | $(1.07)^t$ | $25{,}000 \div (1.07)^t$ |
|:-----------:|:-------------------:|:---------------------------:|
| 1 | 1.070 000 000 | $23,364.49 |
| 2 | 1.144 900 000 | $21,835.97 |
| 3 | 1.225 043 000 | $20,407.45 |
| 4 | 1.310 796 010 | $19,072.38 |
| 5 | 1.402 551 731 | $17,824.65 |

### Step 2 – Apply the annuity formula (cross-check)

$$PV = 25{,}000 \times \frac{1 - (1.07)^{-5}}{0.07}$$

$$= 25{,}000 \times \frac{1 - 0.71298618}{0.07}$$

$$= 25{,}000 \times \frac{0.28701382}{0.07}$$

$$= 25{,}000 \times 4.10019743$$

$$= \$102{,}504.94$$

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## Answers

**(a) Initial lease liability**

$$\boxed{\$102{,}504.94}$$

**(b) Initial right-of-use asset**

Because there are no initial direct costs, no lease incentives, no prepaid lease payments, and no dismantling/restoration obligations, the ROU asset equals the initial lease liability:

$$\boxed{\$102{,}504.94}$$