Ready for IFRS 16? The new accounting standard for leases
IFRS 16 Leases represents a fundamental change in the accounting for leases on the part of lessees. Leases which were once treated “off-balance” as operating leases are now required to be recognized on-balance, resulting in enormous impacts on financial figures. With the implementation of the new standard, companies are faced with large-scale procedural challenges, entailing the necessity for the systematic preparation and monitoring of all lease contracts. Read our current white paper on this issue and obtain a clear overview of the new accounting standard.
You will learn:
- more about the objective of IFRS 16.
- more about the requirements introduced by IFRS 16.
- how the new accounting standard will affect lessees.
- how you can use LucaNet to manage the implementation of the new requirements.
IFRS 16 has been a hot topic since its publication in January 2016. The clock is ticking and there is no time to procrastinate any further: Companies are required to apply this International Financial Reporting Standard for financial years that commence on or after 1 January 2019. The new standard entails some far-reaching changes for lessees. They are now required to recognize right-of-use assets from leases on their balance sheet and recognize future payment obligations as a liability. This means that not only will the balance sheet change significantly but so will key indicators of many companies – particularly those that have large numbers of leased assets. According to a survey conducted by the International Accounting Standards Board (IASB),
85% of worldwide lease contracts (3,3 trillion USD) were reported “off-balance” in the year 2016. Companies in the aviation, shipping, and logistics industry, as well as companies that lease entire property portfolios will have to report a significant increase in assets and liabilities as a result of the new standard.
IFRS 16 replaces the following standards and interpretations:
- IAS 17 Leases
- IFRIC 4 Determining whether an Arrangement contains a Lease
- SIC-15 Operating Leases – Incentives
- SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease
The background for the new lease accounting rules by the IASB was the fact that the majority of financial liabilities from lease contracts were previously only disclosed in the notes to the financial statements. [...]
- Objective of IFRS 16
- The fundamental changes
- Accounting by lessees
- Consequences of IFRS 16 for lessees
- Your flexible solution for IFRS 16
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