Depreciation of ROU Asset
Related terms
Category
IFRS 16
Depreciation of the right-of-use asset is the systematic allocation of the ROU asset cost over the lease term (or useful life for finance leases where ownership transfers). Under IFRS 16, all ROU assets are depreciated. Under ASC 842, only finance lease ROU assets are amortized separately.
Why it matters
ROU asset depreciation is typically calculated on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset. Combined with the declining interest on the lease liability, this creates the front-loaded expense pattern characteristic of IFRS 16 and ASC 842 finance leases.
How Arvexi handles this
Arvexi calculates ROU asset depreciation automatically based on the appropriate period. lease term for most leases, or useful life when ownership transfers. The platform generates depreciation journal entries and maintains the ROU asset carrying value schedule.
Explore how Arvexi automates this: Lease Accounting