IFRS 16 lease calculator
Under IFRS 16, a tenant records a lease liability equal to the present value of the lease payments, discounted at the rate implicit in the lease or its incremental borrowing rate, and a matching right-of-use asset. The asset is depreciated over the lease term and interest is charged on the liability, replacing the rent expense.
Reviewed by Countify's ACCA/FCCA chartered certified accountants · Updated
- Initial lease liability
- AED 535,812.67
- Annual right-of-use depreciation
- AED 107,162.53
- Year 1 interest
- AED 24,948.76
- Year 1 total P&L expense
- AED 132,111.29
Short-term leases (12 months or less) and low-value assets can be expensed instead. SMEs using IFRS for SMEs follow different lease rules.
| Year | Opening liability | Interest | Payment | Closing liability |
|---|---|---|---|---|
| 1 | AED 535,812.67 | AED 24,948.76 | AED 120,000.00 | AED 440,761.43 |
| 2 | AED 440,761.43 | AED 19,245.69 | AED 120,000.00 | AED 340,007.12 |
| 3 | AED 340,007.12 | AED 13,200.43 | AED 120,000.00 | AED 233,207.55 |
| 4 | AED 233,207.55 | AED 6,792.45 | AED 120,000.00 | AED 120,000.00 |
| 5 | AED 120,000.00 | AED 0.00 | AED 120,000.00 | AED 0.00 |
Results are estimates for general information, not tailored advice.
Lease liability for AED 120,000 a year
Payments in advance, 6% discount rate.
| Term | Initial lease liability | Year 1 total P&L expense |
|---|---|---|
| 3 years | AED 340,007.12 | AED 126,536.14 |
| 5 years | AED 535,812.67 | AED 132,111.29 |
| 10 years | AED 936,203.07 | AED 142,592.49 |
The P&L expense is higher than the rent in early years and lower later.
Office leases in the UAE
Most UAE office leases run 1–3 years with annual cheques paid in advance, so choose "in advance". Leases of 12 months or less, and low-value assets, can be expensed as rent instead. Companies using IFRS for SMEs (revenue under AED 50 million can use it for tax) follow a simpler lease approach; our year-end accounts team can advise which applies.
Legal basis
We review this calculator whenever the FTA or Ministry of Finance issues a new decision or clarification.
Frequently asked questions
What discount rate should I use for IFRS 16?
The rate implicit in the lease if known; otherwise your incremental borrowing rate, i.e. what you would pay to borrow a similar amount over a similar term.
IFRS year-end accounts
We prepare IFRS financial statements, including fixed asset and lease schedules, ready for your auditor and your corporate tax return.