Lease accounting for the retail and consumer products industries will change under the new standards. Retail and consumer products companies lease a diverse range of assets from buildings to manufacturing equipment. Sometimes, retailers also act as lessors.
The new leasing standards will require retail and consumer products companies to update their accounting policies based on the new principles. In some cases, extensive analysis may be required to arrive at judgments on how to apply the standards to certain lease types.
Key Considerations
1. Which types of leases are in and out of scope under the new standards? Consider not only traditional property, plant, and equipment, but also intangible assets.
2. How should supply contracts with manufacturers be evaluated? Consider manufacturers of consumer products and whether the manufacturing asset meets right of use requirements.
3. How are sub leases accounted for under the new standards? Consider situations where retailers act as both lessor and lessee of a certain space.
What the Experts Think
Links to Additional Resources
Accounting for leases is changing: What's the impact on consumer market and retail companies?
KPMG's publication covers some of the major potential impacts of IFRS 16 on the retail sector, including end-of-term options, variable payments, service charges, and AROs.
Applying IFRS in consumer products and retail: Leases standard – Consumer products and retail
In their updated "Appyling IFRS" publication, EY lays out the changes to come for the retail and consumer industry stemming from the new lease accounting standards. The publication describes impacts including KPIs, transition approaches, and more.
Applying IFRS in consumer products and retail: IASB issues new leases standard – consumer products and retail
EY describes the implications of the new lease accounting standards on the retail and consumer industry, from its effects on assets and subleases to contracts.
How the FASB’s new leases standard will affect retail and consumer products entities
In their "Technical Line" series, EY provides information on the changes consumer and retail industries should prepare for due to the lease accounting standards.
In depth: Retail and consumer industry supplement to leasing standard
PwC highlights the effects of ASC 842 on the retail and consumer industry, discussing build-to-suit arrangements, contracts and allocation, and more.
Hidden Leases in Consumer Packaging Deals Could Roil Financials
Bloomberg discusses the need for consumer products brands with significant co-product packaging agreements to be on the lookout for embedded leases that, if ignored, could risk a misstatement.
