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In this video tutorial, Sylvia from IFRSbox.com explains the basic method applied in lease accounting under the newest standard IFRS 16. Using a simple example of a car lease with four payments in arrears, she discusses how the lessee should recognize the right of use asset and lease liability at the commencement of the lease. The lessee does not classify the lease anymore, and the right of use asset is calculated based on the lease liability, lease payments, and lease incentives. The incremental borrowing rate is important in determining these amounts.