IFRS 16: Leases
IFRS 16 brought lease liabilities onto the balance sheet for lessees, fundamentally changing lease accounting. This guide covers both lessee and lessor perspectives, helping you navigate ROU assets, lease liabilities, and all the exemptions.
⚠️ The Big Change from IAS 17
Under IAS 17, operating leases were off-balance sheet. IFRS 16 brings almost all leases onto the lessee's balance sheet, recognizing a Right-of-Use (ROU) asset and a corresponding Lease Liability. This significantly impacts financial ratios like gearing and ROCE.
Course Content
Introduction to IFRS 16 & Key Changes
Understand the shift from IAS 17, the single lessee model, and the critical definition of a lease.
Lessee Initial Measurement
Measure the lease liability and ROU asset on Day 1: what counts as a lease payment, choosing the discount rate, and building up the ROU asset.
Subsequent Measurement & Remeasurement
Carry the lease liability at amortised cost, depreciate the ROU asset, and remeasure when lease payments or key assessments change.
Sale and Leaseback Transactions
Learn how to account for complex sale and leaseback deals, including restricted gain recognition.
Lessor Accounting & Exam Strategy
Classify leases as finance or operating from the lessor's side, and follow a step-by-step roadmap for lease exam questions.
Key Exemptions (Recognition Exemptions)
Short-term Leases
Leases with a term of 12 months or less at commencement with no purchase option. Elected by class of asset.
Low-value Assets
Assets with a low value when new, judged in absolute terms regardless of the lessee's size. The IASB indicated roughly US$5,000 or less (Basis for Conclusions, BC100), not a limit in the standard. Elected on a lease-by-lease basis.
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