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In this video tutorial, Sylvia from IFRSbox.com demonstrates the basic method of accounting under the latest standard IFRS 16. She uses a simple example of a lessee renting cars and making four payments of 110,000 currency units in arrears. The incremental borrowing rate is set at four percent per annum. According to IFRS 16, at the beginning of the lease, the lessee should recognize the right-of-use asset and lease liability for all leases, with exceptions. The right-of-use asset is calculated as the lease liability plus lease payments before or on the commencement date, minus lease incentives and the lessee's initial deposit.
