Right-of-use Asset

A right-of-use asset is a financial concept that represents the value a company gains when it obtains the right to use a leased property or asset for a specific period. Instead of owning the asset outright, the company pays rent, but accounting rules treat this lease as if it’s an asset it owns temporarily. The right-of-use asset appears on the company's balance sheet, reflecting the economic benefit of using the space or equipment, and is gradually expensed over the lease term. This approach provides a clearer picture of the company's obligations and resources related to leased assets.