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 telecommunications sector.

• For lessees with operating leases a right-of-use asset will come on balance sheet together with a lease liability.
• Determining whether a contract gives control of a specific asset may require a significant level of judgement for contracts such as network services.
• Leases with a term of 12 months or less and containing no purchase options, and those for low value assets my be accounted for as services.
• Previous high level analysis of current disclosures indicates a possible average increase in EDITDA margin of 2.5 percentage points.
• Previous research of the world's largest 50 telecoms operators suggests as much as $125 billion right-of-use assets will be added to balance sheets, and the level of gross debt increase by between 15-20%.

Download