How right-of-use assets are accounted for
Right-of-use assets refer to assets leased by an enterprise from the lessor, such as leased equipment, office equipment, etc. When the right-of-use assets are recorded, the enterprise needs to record and process them in accordance with certain methods and principles. This article describes the accounting method for right-of-use assets in detail.
1. Confirmation of right-of-use assets.
Recognition of right-of-use assets refers to the process by which an enterprise recognizes the right to use leased assets as its own assets. When recognizing a right-of-use asset, a business needs to meet the following criteria:
1.The lease contract is legal and valid, and the contract clearly stipulates the terms of the lease term, rent, scope of use, etc.;
2.The right to use leased assets can be accounted for and measured separately;
3.The right to use the leased asset is separated from the ownership, and the enterprise only has the right to use, not the ownership.
2. Initial measurement of right-of-use assets.
The initial measurement of right-of-use assets refers to the process of initial recognition and measurement of right-of-use assets when the lease contract takes effect. When it comes to initial measurement, businesses need to consider the following factors:
1.The total amount of rent and the method of payment agreed in the lease contract;
2.The remaining useful life of the leased asset;
3.Other clauses that may exist in the lease contract, such as liquidated damages, insurance premiums, etc.
Depending on the specifics of the lease contract, businesses can choose from the following methods for initial measurement:
1.The total rental amount is used as the initial recorded value of the right-of-use asset;
2.The initial recorded value of the right-of-use asset is the net amount of the total rental less the projected liability;
3.The initial recorded value of the right-of-use asset is the net amount of the total rental less the projected liability plus other expenses.
3. Subsequent measurement of right-of-use assets.
The subsequent measurement of right-of-use assets refers to the process of subsequent recognition and measurement of right-of-use assets during the existence of the lease contract. In subsequent measurements, companies need to consider the following factors:
1.Changes to the lease contract;
2.Depreciation of leased assets;
3.Usage of leased assets;
4.Performance of other terms that may exist in the lease contract.
Depending on the specifics of the lease contract, the company can choose the following methods for subsequent measurement:
1.Subsequent measurement is carried out according to the actual amount of rent paid;
2.Subsequent measurement is carried out according to the depreciation of the leased asset;
3.Subsequent measurement shall be carried out in accordance with other terms agreed in the lease contract.
4. Disposal of right-of-use assets.
The disposal of right-of-use assets refers to the process of disposing of right-of-use assets when the lease contract expires or is terminated early. When disposing of it, businesses need to consider the following factors:
1.Expiration of the lease contract;
2.Residual value of leased assets;
3.Performance of other terms that may exist in the lease contract.
Depending on the specifics of the lease contract, the enterprise can choose the following methods for disposal:
1.Return the leased assets to the lessor;
2.Retain or renew leased assets;
3.Transfer of leased assets to a third party.
In the process of disposal, enterprises need to carry out accounting treatment in accordance with the requirements of accounting standards to ensure the accuracy and completeness of accounting information. At the same time, enterprises also need to pay attention to comply with relevant laws, regulations and policies to ensure legal and compliant operations.
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