How to Record Monthly Depreciation on an IFRS 16 Right-of-Use Asset
Depreciating the ROU asset over the shorter of the lease term or the asset's useful life.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Depreciation Expense (ROU) | Expense (+) | 4,861.00 | - |
| Accumulated Depreciation (ROU) | Contra-Asset (+) | - | 4,861.00 |
💡 Accountant's Note
A JOD 350,000 ROU asset over a 6-year lease is depreciated at JOD 4,861/month. The ROU asset depreciates while the lease liability is reduced by principal — these are two separate calculations.
Practitioner & Systems Framework
💻 ERP Architecture
The ROU asset is depreciated over the shorter of: (a) the lease term (including extension periods if reasonably certain), or (b) the useful life of the underlying asset (if the company will own the asset at lease end). Use straight-line depreciation unless another method better reflects the consumption of the asset's economic benefits. The depreciation and the lease liability interest charges are both in the P&L — the total P&L charge is front-loaded compared to the straight-line rent expense it replaces.
⚠️ Audit Flags
Auditors verify that the depreciation period matches the lease term used in the initial liability calculation — they must be consistent. If the lease term is revised (e.g., when an extension option becomes reasonably certain), both the lease liability is remeasured and the ROU asset depreciation period is updated. Impairment of the ROU asset (see re-rou-asset-impairment) is tested under IAS 36 and occurs independently of the lease liability.
📄 Required Documentation
IFRS 16 opening calculation (confirming the ROU asset initial value), depreciation schedule (ROU cost ÷ lease term in months), accumulated depreciation roll-forward, any lease term revision (and corresponding ROU remeasurement), impairment indicator assessment, and comparison to original rent expense for disclosure purposes.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.