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.