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Thinking Allowed — The new lease accounting

Published on: Aug 31, 2016

Earlier this year the IASB released its new IFRS on lease accounting.

The simple headline is that requirements in the new standard will bring what today is an operating lease onto the balance sheet, as is done with finance leases.

However, the standard changes some of the thinking behind lease accounting. This means that the factors that are important in writing a lease agreement today will change. 

This publication explains the new requirements and provides tools for assessing how your financial statements are likely to be affected. It identifies the areas where accounting judgment will be required — mainly around identifying whether you have a lease or a service agreement, or both; renewal options; and determining the discount rate, particularly on property leases. 

There is quite a bit of choice about how to apply the standard, and those decisions will be important. 

Although the new requirements will not be mandatory until 2019, the pervasive effect of the changes mean that it is important to start thinking about them sooner rather than later.

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