The new standard requires lessees to recognise nearly all leases on the balance sheet which will reflect their right to use an asset for a. On january, 2016, the iasb published a new standard, ifrs 16, leases. Leasing is an important financial solution used by many organisations. For lessees, almost all leases are recognised in the statement of financial position as a rightofuse asset and a lease liability. The recognition and measurement exemption for shortterm leases in ifrs 16 is. It provides a single lessee accounting model to be applied to all leases, whilst retaining a two model approach for lessors.
The international accounting standards board iasb issued ifrs 16 leases in january 2016. Real estate leases the tenant perspective kpmg international. It introduced the revolutionary change in accounting for operating lease contracts by the lessees. The iasbs new leases standard requires companies to bring most leases onbalance sheet, recognising new assets and liabilities. For lessees, it will no longer matter whether a rental agreement is a finance lease or an operating lease with ifrs 16 requiring all leases to be accounted for in the same way. The new lease accounting standard ifrs 16 will require companies to bring most leases onbalance sheet from 2019 on. Tenant has the right to direct the use of the asset. Under ifrs 16, lessees will bring leases on balance sheet. Measuring lease liabilities for these companies will be. The new leases standard ifrs 16 will require lessees to bring most leases onbalance sheet from 2019. B31 neatly summarises the assessment of whether a contract is, or contains, a lease in a decision tree which is reproduced below. Ifrs 16 specifies how an ifrs reporter will recognise, measure, present and disclose leases. In june 2016, the acsb included ifrs 16 in the cpa canada handbook. Brian odonovan is a key member of kpmgs international standards group, as well as deputy leader of two of kpmgs global ifrs topic teams leasing and.
Whats the best option for your business on transition to ifrs 16. Lessees must adopt ifrs 16 using either a full retrospective or a modified retrospective approach. It replaces an earlier international lease accounting standard ias 17. Ifric 4 determining whether an arrangement contains a lease sic 15 operating lease incentives sic 27 evaluating the substance of transactions involving the legal.
Ifrs 16 then specifies how to measure both elements initially and subsequently, how to account for remeasurements, variable lease payments, etc. World financial symposium 2018 ifrs 16, leases agreements at airports. Leases, which are due to become effective for annual periods beginning on or after 1 january 2019. If you re unable to view the presentation online, you can download a pdf version. Executive summary ifrs 16 leases was issued by the iasb in january 2016. Ifrs 16 leases replaces ias 17, sic 15, sic 27 and ifric 4 and sets out the principles for the recognition, measurement, presentation and disclosure of leases by lessors and lessees. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions.
Ifrs 16 leases handbook kpmg global kpmg international. A summary of ifrs 16 leases, including information on current proposals and a timeline of past amendments, announcements, exposure drafts and consultations. Ifrs 16 leases accounting implications for telecoms impact of new leases standard for telecoms at a glance the new standard will be effective for annual periods beginning on or after 1 january 2019 with limited early adoption allowed. The standard was published in january 2016 and is effective from 1 january 2019. Your stakeholdersinvestors will want to understand the impact on your business. Supersedes hkas 17 leases, hkifricint 4 determining whether an arrangement contains a lease, hksicint 15 operating leasesincentives and hksicint 27 evaluating the substance of transactions involving the legal form of a lease. This can include directly using the property or sub leasing it. The attached ifrs 16 indepth publication includes detail discussions of the new lease accounting requirements for lessees and lessors. Ifrs 16 lease modifications kpmg belgium kpmg international. Elements of cost under the cost model, a rightofuse asset is measured initially at cost discussed above less any depreciation and any accumulated impairment losses ifrs 16. Companies accounting under ias 17 have likely transitioned to ifrs 16 earlier this year.
With the creation of new assets and liabilities, the replacement of rental expense with interest and depreciation, financial. Ifrs standards the annotated ifrs standards ifrs ifrs red ifrs 15 pdf ifrs 16 ifrs 17 pdf ifrs 18 pdf ifrs 19 pdf ifrs 2 ifrs 15 ifrs 14 ifrs ifrs 1 ifrs 117 ifrs 10 ifrs 11 ifrs 12 ifrs in 1 day ifrs in a day ifrs bdo. In this handbook, kpmg explains the new leases standard asc 842 in detail. The new lease standard ifrs 16 was issued in 2016 and its mandatory to apply it for the periods starting on or after 1 january 2019. Ifrs 16 leases extracts the attributes of different leasing contract types and processes them in a lease accounting tool according to the new ifrs 16 standard. It provides ifrs 16 disclosure examples and explanations as a supplement to the september 2017 guide. Financial periods beginning on or after 1 january 2019.
Ifrs 16 leases supersedes ias 17 and its associated interpretations. The effects of ifrs 16 on lessor accounting are discussed in section 9 of the document. Inception date of the lease inception date the earlier of the date of a lease agreement and the date of commitment by the parties to. However, the new requirements continue to address lessee and lessor accounting on a pretax basis. The ompany will apply ias 17 in preparing its c financial statements for 2018. Ifrs 16 leases kpmg insight a pretax accounting model tax considerations are often a major factor when a company is assessing whether to lease or buy an asset, and when a lessor is pricing a lease contract.
This supplement focuses on the disclosure requirements in ifrs 16. If youre unable to view the presentation online, you can download a pdf version. It is applicable for accounting periods beginning 1 january 2019 but early application is permitted, provided that ifrs 15 revenue from contracts with customers is. Ifrs 16 changes the way that companies account for leases in their financial disclosures, especially their balance sheets and income statements. Ifrs 16 will have an impact on valuations and ias 36 impairment testing. Ifrs 16 leases 2 this communication contains a general overview of the topic and is current as of february 8, 2017. Ifrs 16 will affect most companies involved in leasing that report under international financial reporting standards ifrs. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value.
Hkfrs 16 leases hong kong institute of certified public. Capture and account for leases with this efficient and effective new tool. Effects analysis international financial reporting. The lessee that makes this accounting policy election does not recognise a lease. Early application is permitted provided the new revenue standard, ifrs 15 revenue from contracts with customers, has been or is applied at the same date as ifrs 16. Under ias 17, as long as the lease is operating, you just book the rental costs as an expense in profit or loss. Ifrs 16 illustrative disclosures kpmg global kpmg international. New leases standard introducing ifrs 16 kpmg international. It explains the key requirements, highlights areas that may result in a change in practice, and features kpmg insights. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Decision tree for identifying a lease under ifrs 16 source.
New lease definition becomes the new onoffbalance sheet test. Lease accounting office equipment, such as computers, are based on ifrs 16 lowvalue assets. New leases standard introducing ifrs 16 kpmg global. World financial symposium 2018 1 identified asset 2 substantially all benefits from use 3 decisionmaking authority. Ifrs 16 leases brings significant changes in accounting requirements for lease accounting, primarily for lessees. We are releasing our indepth application guidance in manageable chunks, one chapter at a time. Ifrs 16 is effective for annual periods beginning on or after 1 january 2019.
The rightofuse asset is measured subsequently at cost, unless the lessee applies the fair value model in ias 40 or revaluation model in ias 16 ifrs 16. Ifrs 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, namely, the customer lessee and the supplier lessor. Applying ifrs a closer look at ifrs 16 leases december. It enables companies to use property, plant, and equipment without needing to incur large initial cash outflows.
The new accounting standard for leases ifrs 16 leases becomes applicable for reporting periods beginning on or after 1 january 2019. Lessees may account for lease payments as an expense in profit or. The new standard brings most leases onbalance sheet for lessees under a single model, eliminating the. Ifrs 16 is a new lease accounting standard published by the international accounting standards board iasb in january 2016. If youre still confused about the differences between old standards and new, the information below will help. Under ifrs 16, companies will bring these leases on balance sheet, using a common methodology. This is because the accounting for a lessor is largely unchanged. This slideshare explains the major impacts, accounting changes, transition options and steps you may need to take to implement the new standard. Ifrs 16 leases handbook kpmg indonesia kpmg international. Background ifrs 16 supersedes ias 17 leases and related interpretations and is effective from 1 january 2019.
Ifrs 16 provides an optional exemption for leases of lowvalue assets. It will have a substantial impact on the financial statements of lessees of property and high value equipment requiring that leases be placed onbalance sheet by recognising a rightofuse asset and a lease. Bc160 is paragraph 160 of the basis for conclusions to asu 201602. The iasb published ifrs 16 leases in january 2016 with an effective date of 1 january 2019. Under ifrs 16, there is no classification for operating leases and capital leases. Any lease with a purchase option cannot qualify as a shortterm lease. These illustrative examples accompany ifrs 16 leases issued january 2016. Ifrs 16 lease components kpmg global kpmg international. Leases understanding the impact of the new standard kpmg. The new leasing standard is the most significant accounting change in a generation. Our experienced teams in financial advisory, real estate and audit help to ensure that you are compliant, harvest costsaving opportunities and implement efficient global lease administration governance. Each one focuses on a particular aspect of the new.
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