Under IFRS 16, depreciation of the right‑of‑use asset is generally over which period?

• A. Over the lease term
• B. Over the asset’s useful life regardless of lease term
• C. Not depreciated; only interest is recognised
• D. Over the first year only

Answer: (A)

The key idea is that the right-of-use asset represents the lessee’s right to use the underlying asset for the period of the lease, so its depreciation reflects the consumption of that right over time. Under IFRS 16, depreciation is generally allocated over the lease term—the period you have the right to use the asset. This matches the economic benefits you obtain from the lease through the use of the asset.

If the lease transfers ownership to you at the end or if the lease term effectively covers the asset’s useful life (for example, when the lease term is longer than the asset’s life or there’s an option that you will exercise), you would depreciate over the shorter of the lease term and the asset’s useful life. But in typical lease arrangements, the depreciation period is the lease term itself.

So the depreciation of the right-of-use asset is generally over the lease term. The other options conflict with the idea that depreciation reflects using the asset during the lease period and that you don’t simply depreciate for one year or skip depreciation entirely.