Understanding ROU in Real Estate: What It Means and How It Applies

Leni Co06 Dec, 2024Real Estate

ROU, or Right of Use Asset, refers to the lessee’s right to utilize an asset for a specified period, as defined in the lease agreement. Based on international accounting standards like IFRS and ASC 842, ROU accounting requires lessees to recognize leased assets and corresponding liabilities on their balance sheets. This approach has transformed financial reporting by improving accountability, ensuring transparency, and providing a clearer picture of lease obligations. In real estate, ROU impacts how leases are treated, reflecting both the asset’s value and the lease liability for better financial clarity.