What is a Right-of-Use (ROU) asset under ASC 842 and IFRS 16?

A Right-of-Use (ROU) asset represents a lessee's right to use an underlying asset for the specified lease term. It is recognized on the balance sheet at the commencement of the lease.

How does ASC 842 differentiate between operating and finance leases?

For finance leases, lessees recognize separate interest and amortization expenses on the income statement. For operating leases, lessees recognize a single, straight-line lease expense over the term.

What is the single-lease model under IFRS 16?

Unlike ASC 842, IFRS 16 removes the classification distinction for lessees. Almost all leases are treated under a single model similar to finance leases, recognizing separate interest and amortization.

How is the discount rate determined for lease liabilities?

The discount rate should be the rate implicit in the lease if readily determinable. If not, the lessee uses its incremental borrowing rate (IBR), reflecting the rate to borrow similar funds over a similar term.