IFRS 16 summary and timeline

A summary of IFRS 16 Leases, including information on current proposals and a timeline of past amendments, announcements, exposure drafts and consultations.

Summary

IFRS 16 replaces IAS 17. It provides a single lessee accounting model to be applied to all leases, whilst retaining a two model approach for lessors.

Lessees recognise a right-of-use asset and a lease liability on the commencement of a lease.

• The asset is initially recognised at the amount of the lease liability plus initial direct costs; it is subsequently measured using the cost model unless the underlying asset is investment property measured at fair value or PPE measured under the revaluation model.
• The liability is initially measured at the present value of the lease payments over the lease term, discounted at the rate implicit in the lease.

An election can be made on a lease-by-lease basis to apply alternative accounting treatment to leases with a term of less than 12 months and leases for low value assets. In this case lease payments are recognised as an expense on a straight-line basis, or another systematic basis, over the lease term.

Lessors classify leases as either operating or finance leases:

• Operating lease income is recognised on a straight line basis over the lease term; the underlying asset is presented in the statement of financial position (balance sheet).
• Finance lease income is recognised over the period of the lease to reflect a constant periodic rate of return; the underlying asset is derecognised and a receivable recognised instead, measured initially at the net investment in the lease.

Current proposals

1. The Board issued ED/2019/7 General Presentation and Disclosures in December 2019. The exposure draft proposes a new IFRS Standard to replace IAS 1. One of the proposed changes is to classify income and expenses in the statement of profit or loss as operating, investing or financing. In accordance with this, references to ‘finance costs’ in IFRS 16 would be amended to be references to ‘expenses from financing activities’.
   • Read ED/2019/7 General Presentation and Disclosures

Timeline

Date	Update
22 September 2022	IASB issues narrow-scope amendments to requirements for sale and leaseback transactions: Lease Liability in a Sale and Leaseback Amendments to IFRS 16
31 March 2021	Covid-19-Related Rent Concessions beyond 30 June 2021 extends the original IFRS 16 amendment issued in May 2020 by one year to cover rent concessions that reduce only lease payments due on or before 30 June 2022. Effective for annual reporting periods beginning on or after 1 April 2021.
5 January 2021	UK-adoption of Amendments for IBOR Phase 2 and Amendments to IFRS 4 The Interest Rate Benchmark Reform—Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) was adopted for use in the UK and is effective for annual periods beginning on or after 1 January 2021.
27 November 2020	IASB proposes amendment to its leases Standard to improve accounting for sale and leaseback transactions
27 August 2020	IASB issues Interest Rate Benchmark Reform Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Effective from 1 January 2021
28 May 2020	IASB issues COVID-19-Related Rent Concessions Amendment to IFRS 16 Effective from 1 June 2020
14 May 2020	IASB issues Annual Improvements to IFRS Standards 2018 – 2020 There is no effective date for the amendment
21 May 2019	IASB proposes amendments to IFRS 16 in ED/2019/2 Annual Improvements to IFRS Standards 2018–2020
13 January 2016	IASB issues IFRS 16 Leases Effective for annual periods starting on or after 1 January 2019.