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In this video tutorial by Sylvia of ifrsbox.com, the basic method applied in the lease accounting under the newest standard IFRS 16 is explained. Using a simple example of car rentals, it is shown that the lessee makes payments in arrears and the incremental borrowing rate is used. IFRS 16 states that the lessee should recognize the right of use asset and lease liability at the commencement of the lease. This simplifies lease classification and the right of use asset is calculated based on lease liability, lease payments, and initial direct costs.