Lease Calculator (NFRS 16 / IFRS 16)
Enter the rent, lease period and interest rate to see the lease liability, right-of-use asset, interest, depreciation and the journal entries for every year.
1. Lease terms
2. Other amounts
3. Any other lease term
Add a fixed extra payment under the lease, such as a security fee or yearly maintenance. Type the month it is paid: 0 is the commencement day, 12 is the end of month 12.
4. Show the years as
Lease liability at commencement
Entry on the commencement date
| Account | Debit | Credit |
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Year by year
Right-of-use asset and profit and loss
Journal entries for each year
Monthly schedule
How the lease is accounted for
This calculator follows NFRS 16 (the Nepal adoption of IFRS 16) for the person renting the asset, the lessee. Instead of treating rent as a simple expense, the lessee books an asset and a liability on the day the lease starts.
- Lease liability: the present value of the rent still to be paid, discounted at the interest rate. Each month interest is added and rent paid reduces it, until it reaches zero at the end.
- Right-of-use asset: the liability plus any rent paid before or on the first day and initial direct costs, less incentives from the lessor, plus any restoration cost. It is depreciated straight line over the lease period.
- Profit and loss: depreciation plus interest, instead of rent. The charge is higher in the early years and lower later, although the total over the lease matches the cash paid.
- Balance sheet: the liability due within 12 months of each year end is current; the rest is non-current.
Short leases and small companies
A lease of 12 months or less, or of a low-value asset, can be left off the balance sheet and the rent expensed straight line. Entities that follow NFRS for SMEs and have an operating lease also expense rent straight line, with prepaid or accrued rent for the difference to cash. Choose the NFRS for SMEs basis above to see that.
Points to keep in mind
- Enter the rent without VAT. Tax deducted at source on rent changes the cash paid to the owner, not the lease accounting.
- Only fixed rent increases belong in the lease liability. Increases tied to an index, such as inflation, are expensed as they occur.
- The restoration cost is added to the asset and provided for without discounting; the yearly unwinding of that provision is not calculated here.
- This is a planning aid. Check the figures against the lease agreement and your auditor's view before booking them.
Frequently asked questions
What is NFRS 16?
NFRS 16 is the Nepal Financial Reporting Standard that matches IFRS 16 for leases. A lessee books a right-of-use asset and a lease liability for almost every lease, then charges depreciation and interest instead of rent.
Do all leases have to go on the balance sheet?
No. Leases of 12 months or less and leases of low-value assets can be expensed straight line instead. Entities that follow NFRS for SMEs expense the rent of an operating lease straight line as well.
Which interest rate should I use?
Use the rate the lease states if it can be worked out, otherwise your incremental borrowing rate: what you would pay to borrow, over a similar term and with similar security, to buy a similar asset.
Why is the expense higher in the early years?
Interest is charged on the outstanding liability, which is largest at the start. Depreciation is the same each year, so depreciation plus interest falls over the lease. The total over the lease still equals the cash paid plus initial costs.
What about VAT and tax deducted at source on rent?
Enter the rent without VAT, because the VAT is not part of the lease liability if it can be claimed back. Tax deducted at source changes how much is paid to the owner and how much to the tax office, not the lease accounting.