Close & reporting
Lease accounting (ASC 842 / IFRS 16)
Office, warehouse and equipment leases brought onto the balance sheet as a right-of-use asset and a lease liability under IFRS 16, with monthly amortisation tracked going forward, for UAE companies leasing space in a free zone or on the mainland.
Management report
Illustrative client · August 2026
AED
| Line | Aug | Jul | |
|---|---|---|---|
| Revenue | 142,380 | 131,904 | +10,476 |
| Cost of sales | (51,260) | (48,115) | (3,145) |
| Gross profit | 91,120 | 83,789 | +7,331 |
| Payroll | (46,300) | (45,900) | (400) |
| SoftwareNoted | (6,480) | (5,490) | (990) |
| Rent | (8,000) | (8,000) | 0 |
| Other operating | (9,215) | (9,870) | +655 |
| Net income | 21,125 | 14,529 | +6,596 |
Reviewer's note
Software is up on last month after two seats were added mid-month. Revenue includes one milestone invoice that will not repeat next month.
Illustrative. An example of the document, not a client's figures.
The rent line that became a balance sheet item
IFRS 16 moved most leases off the profit and loss as a simple rent expense and onto the balance sheet as a right-of-use asset paired with a lease liability. A UAE business renting a free zone office, a mainland warehouse, or running a fleet of company vehicles is usually looking at several leases that all need bringing on under this treatment, not just the largest one.
Building the inventory first
Every lease agreement gets logged with its term, payments and any renewal option, and the liability gets calculated using either the rate implicit in the lease or a reasonable incremental borrowing rate where that is not stated, documented so the basis can be revisited if terms change later.
Not every lease qualifies
A practical expedient under IFRS 16 lets short-term leases stay off the balance sheet, and we check that lease by lease against its actual term rather than assuming a whole portfolio of small office and storage leases qualifies just because most of them are short.
Renewals change the math
Where renewing is reasonably certain rather than merely possible, that extension gets folded into the lease term used for the liability calculation, since treating an almost-certain renewal as if it might not happen understates the real obligation on the books.
Feeding the disclosure notes
The finished schedule supports the lease disclosure notes behind the financial statements, amortised monthly and reviewed by a senior reviewer, inside whichever accounting file already holds the business's fixed asset records.
Questions
Frequently asked questions: Lease accounting (ASC 842 / IFRS 16)
Does every lease need to go on the balance sheet?
Short-term leases can often be excluded under a practical expedient available under IFRS 16, confirmed lease by lease rather than assumed across the whole portfolio.
Do renewal options change the lease liability calculation?
Where a renewal is reasonably certain to be exercised, it is included in the lease term used to calculate the liability.
Can this cover a free zone office desk and a mainland warehouse in the same schedule?
Yes, each lease is inventoried and classified on its own terms regardless of whether it sits in a free zone or on the mainland, and all feed the same disclosure schedule.
Do month-to-month leases need to be on the balance sheet?
Short-term leases can often be excluded under a practical expedient available in both standards; we confirm this lease by lease.
What discount rate do you use for the lease liability?
We use your incremental borrowing rate where it is known, or a reasonable estimate agreed with you where it is not, and document the basis in the schedule.
What if our records for lease accounting (ASC 842 / IFRS 16) are not up to date?
If your records are behind, we scope a catch-up first so lease accounting (ASC 842 / IFRS 16) starts from a clean, reconciled base. That catch-up is priced and timed separately from the ongoing engagement, so you always know what each part costs.
Who reviews the work before it reaches us?
Every deliverable under lease accounting (ASC 842 / IFRS 16) is reviewed by a senior reviewer before it reaches you. You keep access to the underlying file at every stage, so nothing about the work happens somewhere you cannot see it.
Related services
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Industries
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Next step
Talk to the team that would run your books
A short call covers your setup, your software and what a first month would look like. You get a written scope and price after it.