Adoption of the requirement of the new lease (IFRS 16)

The IASB announced the new leasing standard in January 2016 – it comes into effect on 1 January 2019.

What's the issue?

Leasing is an important financial solution used by many organisations. It enables companies to use property, plant, and equipment without needing to incur large initial cash outflows. Under existing rules, lessees generally account for lease transactions either as off-balance sheet operating or as on balance sheet finance leases. The new standard requires lessees to recognise nearly all leases on the balance sheet which will reflect their right to use an asset for a period of time and the associated liability to pay rentals. The lessor’s accounting’ model largely remains unchanged.

The accounting and financial impacts are just the tip of the iceberg. The pervasiveness of these rules may require companies to transform their business processes in many areas, including finance and accounting, IT, procurement, tax, treasury, legal, operations, corporate real estate and HR.

How we can help

The practical application of the sometimes form-driven, often complex, accounting literature and applying it to the specific facts and circumstances around your business can be challenging.

Contact us to learn more about how we can help you ensure your financial reporting will be compliant with the leasing standard – and manage your lease business and process transformation in an efficient and measured way.