Lease incentive
In one sentence
A lease incentive is a payment made by the lessor to or on behalf of the lessee, such as a tenant improvement allowance or rent-free period, that reduces the right-of-use asset.
Lease incentives — for example a tenant improvement allowance, a rent-free period, or reimbursement of moving costs — reduce the lease payments and the right-of-use asset. Incentives received at or before commencement reduce the ROU asset directly.
Cite: ASC 842-20-30-5(c)
Right-of-use (ROU) asset
A right-of-use asset is the lessee's right to use a leased asset over the lease term, recognised on the balance sheet at the lease liability plus prepaid payments and initial direct costs, less incentives.
Read definition →Initial direct costs
Initial direct costs are incremental costs of obtaining a lease that would not have been incurred if the lease had not been obtained — they are added to the right-of-use asset.
Read definition →See Lease incentive in a real calculation
Enter a lease and Ledgerage computes it — every figure traced back to the standard.