Lease Accounting Guide

Complete IFRS 16 Lease Accounting Guide

Comprehensive guide to IFRS 16 lease accounting covering right-of-use assets, lease liabilities, implementation strategies, and compliance requirements for financial institutions.

Right-of-Use AssetsLease LiabilitiesImplementation Guide12,000+ Words

Table of Contents

Navigate through the complete IFRS 16 lease accounting guide

1
IFRS 16 Overview & Changes
2
Lease Recognition Criteria
3
Initial Measurement
4
Subsequent Measurement
5
Disclosure Requirements
6
Implementation Guide
Section 1

IFRS 16 Overview & Key Changes

Understanding the fundamental changes from IAS 17 to IFRS 16 lease accounting

IAS 17 (Old Standard)

Dual Classification
Operating vs Finance leases for lessees
Off-Balance Sheet
Operating leases not recognized
Straight-Line Expense
Equal expense recognition

IFRS 16 (New Standard)

Single Model
All leases recognized on balance sheet
Right-of-Use Assets
ROU assets and lease liabilities
Front-Loaded Expense
Depreciation + interest expense

Key Objectives of IFRS 16

Transparency

Provide better visibility of lease obligations and rights

Comparability

Ensure consistent lease accounting across entities

Relevance

Reflect economic reality of lease transactions

Section 2

Lease Recognition Criteria

When should leases be recognized under IFRS 16?

Contract

Identifies underlying asset
Conveys right to use asset
Throughout contract period

Control

Right to obtain economic benefits
Right to direct asset use
Ability to change asset use

Term & Value

Lease term longer than 12 months
Asset value not low
Practical expedients available

Practical Expedients

Short-term Leases

Lease term ≤ 12 months
No purchase option reasonably certain
Expense Recognition
Straight-line basis over lease term
No Balance Sheet Impact
No ROU asset or lease liability

Low-value Assets

Asset value ≤ $5,000
De minimis threshold for recognition
Judgment Required
Assessment of asset value and quantity
Straight-line Expense
Similar to short-term lease treatment
Section 3

Initial Measurement

How to calculate right-of-use assets and lease liabilities at commencement

Right-of-Use Asset

Lease Liability Amount
Initially measured at same as lease liability
Plus Initial Direct Costs
Costs to arrange and negotiate lease
Plus Restoration Costs
Costs to restore asset to original condition
Less Lease Incentives
Any incentives received from lessor

Lease Liability

Present Value of Payments
All lease payments over lease term
Discount Rate
Incremental borrowing rate or implicit rate
Fixed Payments
Payments not subject to change
Variable Payments
Linked to index/rate (excluded from liability)

Discount Rate Determination

Rate Hierarchy

1
Implicit Rate in Lease
If readily determinable
2
Incremental Borrowing Rate
Lessee's rate for similar asset/term

Key Considerations

Currency Consistency
Match lease payments currency
Term Matching
Similar duration to lease term
Market Rates
Current market conditions

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