IFRS 16 Leases

IFRS 16 Overview

The New Lease Accounting Standard for International Financial Reporting

What is IFRS 16?

IFRS 16 is a new lease accounting standard published by the International Accounting Standards Board (IASB) in January 2016. This new standard changes the way that companies account for leases in their financial disclosures, especially their balance sheets and profit and loss statements. IFRS 16 replaces an earlier international lease accounting standard – IAS 17.

The first wave of companies transitioning to IFRS 16 will start with accounting periods beginning January 1, 2019 for public companies. Other entities such as private companies will begin adoption starting January 1, 2020.

IFRS 16 applies to both the lessors (that finance the leased assets) and the lessees (that use the leased assets). However, the majority of changes introduced in IFRS 16 impact lessees.

Learn More about IFRS 16Learn More about IAS 17

Impacts to Financial Statements

IFRS 16 Impact to Statement of Financial Position

With IFRS 16, almost all leases will be reported on corporate balance sheets. A new right-of-use (ROU) asset will be presented separately on the balance sheet, as will a separate lease liability. Under the current standard, IAS 17, only certain lease arrangements – called finance leases – were listed on the statement of financial position while operating leases were only reported in the footnotes. Under IFRS 16,  all leases will now be considered finance leases unless they meet certain exceptions and will be reported on the statement of financial position. Key financial metrics such as Return on Assets will be influenced through the addition of these new assets and liabilities to the balance sheet.

IFRS 16 Impact to Profit and Loss Statement

Companies must report a depreciation charge for leased assets within the operating costs section of the profit and loss statement. An interest expense must be reported for lease liabilities within the finance costs section of the profit and loss statement. Under the current standard, IAS 17, companies reported a straight-line lease expense that was typically the same in each period of the lease. With IFRS 16, the expenses for leases will be front-loaded as the amount of interest is reduced over the term of the contract.

IFRS 16 Calculator

Volkswagen Financial Services Fleet launched an IFRS 16 Calculator to calculate the lease liability, right-of-use asset, interest, and depreciation expense.

Go to IFRS 16 Calculator

IFRS 16 Lease Accounting Guides

Technical Standards Documentation from the Big Four and Accounting Boards

Explore the details of the new IFRS 16 standard by reviewing these guides from the International Accounting Standards Board and the National Policy Offices of the Big Four firms.

IASB Guide to IFRS 16

The International Accounting Standards Board’s resource page for the new leasing standard. Includes links to supplemental materials, including webcasts, articles, and technical inquiries.

Deloitte’s Guide to IFRS 16

Comprehensive Guide to the new IFRS 16 leasing standard. Covers identifying leases, separating components, and a discussion of lease terms, payments, and classifications.

KPMG’s Guide to IFRS 16

Outlines the new requirements of IFRS 16 as well as the impacts to balance sheets and income statements. Also, includes a guide to transition options and effective dates.

EY on Applying IFRS 16

EY’s detailed guide to applying the IFRS 16 leasing standard. Includes an in-depth discussion on topics from lease identification and classification to presentation and disclosures.

Deloitte model financial statements

Deloitte models what financial statements would look like for companies that have early adopted IFRS 16 in this appendix to their International GAAP Holdings Limited Model financial statements.

PwC video series on lessee accounting

PwC's videos review the impact of the new IFRS 16 leasing standards on how the value of right-of-use assets are measured, as well as key performance indicators.

Key Questions To Get Ready For IFRS 16

KPMG's list includes ten key questions to ask about your company's leases in order to get ready for the new IFRS 16 leasing standard.

EY's Summary of IFRS 16

EY’s detailed guide summarizes the new IFRS 16 leasing standard and the effect it will have on your company.

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