Has your organisation already successfully implemented the new IFRS 16 regulations? If not, this joint webinar by Heineken, PwC and Planon could be of great value for you, providing practical information on how to accelerate your IFRS 16 implementation.
IFRS 16
IFRS 16 is a lease accounting regulation from the International Accounting Standard Board that requires publicly listed companies to include on their balance sheets all leasing contracts with a contract term longer than one year.
IFRS 16 is a lease accounting regulation from the International Accounting Standard Board (IASB) that requires publicly listed companies to include on their balance sheets all leasing contracts with a contract term longer than one year. IFRS 16 is the global standard for lease accounting, in combination with ASC 842 from the Financial Accounting Standards Board (FASB) in the United States. The IFRS 16 effective date for an entity to apply these standards for annual reporting periods was on or after 1 January 2019.
Because of the complexity of the lease accounting standards, IFRS 16 software is required to meet all the regulations and report in a compliant way. Learn in this article how to get started with IFRS 16:
- What are the differences between IAS 17 and IFRS 16? And what will be the impact?
- Learn from IFRS 16 examples.
- How to become IFRS 16 compliant.
Comparison between IAS 17 and IFRS 16
The previous accounting model for leases (IAS 17) required lessees and lessors to classify their leases as either finance leases or operating leases and account for those two types of leases differently. That model was criticised for failing to meet the needs of users of financial statements because it did not always provide a true representation of leasing transactions. In particular, it did not require lessees to recognise assets and liabilities arising from operating leases.
IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. This approach will result in a more realistic representation of a lessee’s assets and liabilities and, together with enhanced disclosures, will provide greater transparency of a lessee’s financial leverage and capital employed. According to the Europe Economics the three most operation lease-intensive sectors worldwide are airlines, retail and travel & leisure.
IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases, with the objective of ensuring that lessees and lessors provide relevant information that truly represents those transactions. [IFRS 16:1]
What will be the impact of IFRS 16 on the organisation? 
As a result of moving from IAS 17 to IFRS 16, the main difference will be an increase in lease assets, finance lease liabilities and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation). The range of potential IFRS 16 impacts is wide: 53% of entities would experience an increase in debt over 25% (PwC).
Identifying a lease
A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. [IFRS16:9]
Control is conveyed where the customer has both the right to obtain substantially all the economic benefits from use of the identified asset and to direct the use of that asset. [IFRS16:B9]
An entity shall apply this Standard consistently to contracts with similar characteristics and in similar circumstances.