IASB introduced the new Leases Standard globally
The International Accounting Standards Board issued a new accounting Standard, called IFRS 16 Leases. It replaces accounting requirements introduced more than 30 years ago.
Leasing provides an important and flexible source of financing for many companies. However, the old lease accounting Standard (IAS 17 Leases) makes it difficult for investors and others to get an accurate picture of a company’s lease assets and liabilities, particularly for industries such as the airline, retail and transport sectors.
Listed companies using IFRS Standards or US GAAP are estimated to have around US$3.3 trillion of lease commitments; over 85 per cent of which do not appear on their balance sheets. That is because leases to date have been categorised as either ‘finance leases’ (which are reported on the balance sheet) or ‘operating leases’ (which are disclosed only in the notes to the financial statements).
New LEASING standard IFRS 16 Summary:
- 1st January 2019 is the date Companies are required to apply New leasing standard
- Supersedes IAS17
- Aims to improve transparency and comparability between companies
- IFRS for SME’s has not been changed by IFRS 16 only full IFRS for enterprises
- Low-value assets such as ICT or office equipment with a capital value less than US$5,000 (below materiality) are exempted from the scope (i.e. do not have to be capitalised)