IASB Chairman discusses lease accounting

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01 Apr 2016

IASB Chairman Hans Hoogervorst has written an article “Shining the Light on Leases” that discusses the problems with current lease accounting requirements and how the IASB addresses these in its new standard IFRS 16 'Leases'.

In his article, Mr Hoogervorst acknowledges that IFRS 16 will result in a substantial change to many companies’ balance sheets and "will not be popular with everyone". However, he notes, the IASB has looked at all possible risks carefully and has concluded that the risks and costs are manageable. He states that:

  • IFRS 16 will not put the leasing industry out of business and leases will remain attractive as a flexible source of finance. 
  • The IASB believes that is is highly unlikely that the improved visibility of lease obligations will lead to significant effects in terms of the cost of borrowing and debt covenants.
  • There will be costs involved in updating systems to implement IFRS 16.
  • The IASB is convinced that the benefits of IFRS 16 will greatly outweigh its costs.

Please click to access the full text of Mr Hoogervorst's article, which first appeared on IFAC Global Knowledge Gateway, on the IASB website.

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