Point of view — Aviation implications of the new leasing standard

Published on: 14 Jan, 2016

IFRS 16 Leases has been published and is effective for periods beginning on or after 1 January 2019 (subject to EU endorsement).  This publication highlights issues from the new leasing standard that will be of interest to those in the aviation sector.

  • For lessees with operating leases an 'aircraft' (right-of-use) asset will come on balance sheet together with a lease liability.
  • Significant KPIs including ROCE will be affected - for some it will increase, for others decrease.
  • For foreign currency leases there will be increased profit and loss volatility as the lease liability is retranslated.
  • For a 'wet' lease only payments for the aircraft need to be recognised, the service element may be separated with the accounting unchanged.
  • The changes for an entity and the comparison with peers will need to be explained to stakeholders.

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