The review identified that there are a number of areas where disclosure could be improved. Notwithstanding that half-yearly disclosures are less extensive than those of a full year, the FRC were of the opinion that “some companies did not sufficiently explain the impact of adopting IFRS 16”. The FRC expects that disclosures in full year reports will be more comprehensive.

The FRC’s key findings were that the following disclosures could be improved:

• information about key judgements made on adopting the new standard, explaining the specific judgements made and the effect on the accounts;
• for modified retrospective adopters:
  • clearer communication of transition choices;
  • better explanations of the difference between the IAS 17 commitments and the IFRS 16 lease liability; and
  • clarification that alternative performance measures have not been restated and where new APMs are used that disclosure is consistent with ESMA’s Guidelines.

The FRC indicates that the best disclosures were those that were specific to the entity. Some examples of disclosure from interim accounts that the FRC considers good are provided in the report.

The FRC comments:

We encourage companies to carefully consider the findings of this review when determining the extent of disclosures included within their next annual reports. Companies should aim to ensure not only that mandatory disclosure requirements have been met, but that they have addressed the disclosure objective of the standard. Starting with this objective will go a long way to ensuring that readers understand the impact of IFRS 16 on the company.

A press release and the full thematic review are available on the FRC website.