How is the right of use asset initially measured under IFRS 16?

Under IFRS 16, the right-of-use asset is initially measured at cost, which includes several components. This comprehensive measurement entails summing the present value of future lease payments, as well as any initial direct costs, which may include deposits, fees related to the lease, and possibly any costs associated with dismantling the asset if these costs are expected to be incurred.

The present value of the lease payments is crucial because it reflects the economic reality of the lease obligation. Nonetheless, including deposits and initial direct costs is also vital since they contribute to the total expenditure incurred to secure the right to use the underlying asset.

This approach ensures that the right-of-use asset accurately reflects all identifiable costs associated with acquiring the right to use the leased asset. Thus, option D encompasses all these relevant elements, leading to a more precise and fair representation of the asset's initial value on the balance sheet as mandated by IFRS 16.