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IFRS 16: putting theory into practice

Welcome to our new hub containing a suite of resources covering IFRS 16, which sets out the principles that both lessees and lessors apply to provide relevant information about leases. This hub contains a range of articles and extracts from various sources, including a new IFRS 16 Leases report published by the Financial Reporting Faculty exploring the IASB's new leases standard.

Introduction by Nigel Sleigh-Johnson FCA, Head of Financial Reporting Faculty, ICAEW

The former IASB chairman Sir David Tweedie once famously bemoaned the fact that he had never flown on a plane that was on the airline’s balance sheet. The reason behind this apparent anomaly was that airlines typically leased their aircraft rather than buying them. And a little careful structuring of a lease arrangement or two meant that it was fairly easy for them to keep both the plane and the related lease liability off-balance sheet. Sir David declared, in his inimitable way, that the IASB’s leasing standard was ‘absolutely useless’ and promised that all leases would be on-balance sheet within three years. That was way back in 2002. It has taken a lot longer than Sir David hoped but, after many a twist and turn, the IASB finally issued its long-awaited new leasing standard in January 2016. Its septuagenarian former chairman can finally sleep easy at night.

The publication of IFRS 16 Leases finally brought to a close a debate that had lasted for a generation. The age-old distinction in international standards between finance leases and operating leases is no more, meaning that, for the first time, almost all leases will appear on the balance sheet of the lessee. The new standard – which is effective for accounting periods beginning on or after 1 January 2019 – is intended to improve both comparability and transparency by providing users with a more complete and understandable picture of an entity’s leasing obligations. The effect of the new standard will, of course, vary between individual companies, sectors and even geographical regions. The impact is likely to be most pronounced in those business sectors – such as transportation, real estate, mining and construction – where there are currently a significant number of material off-balance sheet leases. Companies with significant leased premises – such as retailers – will be similarly affected. But whatever sector your business operates in, it is likely that implementing the new standard will present a formidable logistical challenge.

ICAEW and IFRS Foundation – On-demand training solution

IFRS 16 Leases: understanding the challenges of implementation. Tap into key learning resources from the standard-setters and panel debates with representatives from global professional firms and organisations who have already implemented the Standard

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As IFRS 16’s effective date draws ever nearer, this publication brings together the views of leading experts to help you plan for the change that lies ahead. We hope that it will provide a useful reference point during your journey towards implementation.

Dr Nigel Sleigh-Johnson FCA
Head of Financial Reporting Faculty, ICAEW

IFRS 16 Leases: Putting theory into practice

This special publication from the Financial Reporting Faculty looks at the IASB's new leases standards. Delegates for the joint ICAEW and IFRS Foundation virtual conference, taking place on 10 October, can download a copy of this report.

IFRS 16 Leases

IFRS 16 prescribes a single lessee accounting model that requires the recognition of asset and corresponding liability for most leases.

IFRS 16 leases - FAQs

The Financial Reporting Faculty answers your initial questions on the IASB’s new leases standard.

Implementing leasing standards (IFRS 16)

This report, Audit insights retails - are you ready for a radical change, helps retailers and external users of accounts to understand some of the important issues that need to be addressed as the standard is implemented.

ICAEW library resources

Find articles, books and online resources providing quick links to the standard, summaries, guidance and news of recent developments.