Right-of-Use Asset
Right-of-Use Asset refer to a type of equity, in which the holder has the right to use a specific asset and derive benefits from it, but does not own the ownership of the asset. Usufructuary assets can include land, buildings, equipment, etc., and the holder can use these assets and receive corresponding returns through leasing, franchise operations, etc.
Definition: A right-of-use asset refers to a right that allows the holder to use a specific asset and derive benefits from it without owning the asset. Right-of-use assets can include land, buildings, equipment, etc. The holder can use these assets through leasing, franchising, or other arrangements and receive corresponding returns.
Origin: The concept of right-of-use assets originates from leasing and franchising business models, which have existed for centuries. With the increasing complexity and globalization of the modern business environment, the management and accounting of right-of-use assets have become more important. In 2019, the International Financial Reporting Standard (IFRS 16) came into effect, further standardizing the recognition and measurement of right-of-use assets.
Categories and Characteristics: Right-of-use assets can be categorized into the following types:
- Land Use Rights: The holder obtains the right to use land through leasing or franchising agreements, typically for agricultural, industrial, or commercial purposes.
- Building Use Rights: The holder uses buildings through leasing agreements, such as office buildings, warehouses, or retail stores.
- Equipment Use Rights: The holder uses equipment through leasing agreements, such as machinery, vehicles, or computer equipment.
Specific Cases:
- Case 1: A company obtains the right to use an office building through a leasing agreement for 10 years. The company pays rent annually and recognizes the right-of-use asset and corresponding lease liability in its financial statements.
- Case 2: A manufacturing enterprise obtains the right to use a high-end production equipment through a leasing agreement for 5 years. The enterprise pays rent monthly and recognizes the right-of-use asset and corresponding lease liability in its financial statements.
Common Questions:
- Question 1: How are right-of-use assets recognized in financial statements?
Answer: According to IFRS 16, right-of-use assets should be measured at cost on the lease commencement date and recognized in the balance sheet. Lease liabilities should also be measured at present value on the lease commencement date. - Question 2: How is the depreciation of right-of-use assets calculated?
Answer: Right-of-use assets should be depreciated on a straight-line basis or another systematic and rational method over the lease term or the asset's useful life, whichever is shorter.
