Glossary

AASB 16

In short

AASB 16 is the Australian accounting standard for leases. Under it, a lessee recognises a right-of-use asset and a lease liability on the balance sheet, then depreciates the asset over the lease term while the liability unwinds into an interest and principal split each period. It brings most leases onto the balance sheet rather than treating them as a simple expense. This is general information, not accounting or financial advice.

AASB 16

AASB 16 is the Australian accounting standard for leases, aligned with the international standard IFRS 16. Its central change was to bring most leases onto the balance sheet. Instead of treating a lease as a simple rental expense each period, a lessee recognises a right-of-use asset, representing its right to use the leased item, and a lease liability, representing its obligation to pay for it.

This page provides general information about an accounting standard. It is not accounting, tax or financial advice. Confirm treatment with your accountant or adviser.

The two moving parts

Under AASB 16 a lease generates two things that change each period.

The right-of-use asset is depreciated over the lease term, commonly by spreading the opening right-of-use balance evenly across the months of the term. That depreciation is a charge much like the depreciation of an owned asset.

The lease liability unwinds as payments are made. Each payment is split: part is interest on the outstanding liability, calculated from a discount rate, and the rest reduces the principal. As the liability falls, the interest portion of each payment shrinks and the principal portion grows.

So a single monthly lease payment is not a single expense line under AASB 16; it is split into interest and principal, while the right-of-use asset depreciates on its own schedule alongside.

AASB 16 and AASB 116

The numbers are similar, but the standards cover different assets. AASB 16 is for leases, with a right-of-use asset and a lease liability. AASB 116 is for owned property, plant and equipment. An operator usually has both: owned plant under AASB 116 and leased premises, vehicles or equipment under AASB 16.

How Cohiva Control uses it

Cohiva Control includes AASB 16 as one of its six depreciation methods. It computes the right-of-use depreciation and the lease liability unwind together, keeping the interest and principal split correct period by period. Money is held as a fixed-precision decimal rounded half up, the ledger is append-only, and the monthly run can post a journal to your accounting system. How a particular lease should be classified and treated is a matter for your accountant; Cohiva Control computes and records it once those decisions are made.

Part of the Cohiva platform

Cohiva Control is part of the Cohiva platform. Leisure operators often run it with Cohiva Complex, and finance teams connect it to Cohiva Crunch for the general ledger. Explore the platform at www.cohiva.app.

Frequently asked questions

What changed under AASB 16?
It brought most leases onto the balance sheet. Instead of recording lease payments as a simple expense, a lessee recognises a right-of-use asset and a lease liability, then depreciates the asset and splits each payment into interest and principal.
How is the right-of-use asset depreciated?
It is depreciated over the lease term, commonly by spreading the opening right-of-use balance evenly across the months of the term.
How is AASB 16 different from AASB 116?
AASB 16 covers leases, with a right-of-use asset and a lease liability. AASB 116 covers owned property, plant and equipment. They apply to different kinds of asset, and many operators have both.