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Sylvia from IFRSbox.com explains the basic method for lease accounting under IFRS 16 in this video tutorial. Using a simple car rental example, she demonstrates how to calculate the right of use asset and lease liability at the commencement of the lease. The lessee recognizes the right of use asset as the lease liability plus lease payments before or on the commencement date, less lease incentives and initial direct costs. Additionally, she discusses the concept of incremental borrowing rate and emphasizes the importance of following the guidelines outlined in IFRS 16 for lease classification.
