IFRS 16 overview: What does the future hold For your lease contracts?

In January 2016, the IASB published IFRS 16, its new accounting standard on leases. This signals the end of a major and often controversial project, which aimed to provide a more faithful representation of leases in IFRS financial statements.

The changes introduced by the standard will primarily affect the financial statements of lessees, as the IASB opted to retain the current accounting principles for lessors. IFRS 16 thus removes the symmetry that existed between the accounting for leases by lessees and lessors.

Companies have until 1st January 2019 to prepare for the change. However, it is a good idea to start thinking about the new definition of a lease and the new accounting model straight away. This will enable companies to anticipate the accounting impacts of the change of standard, the impacts on financial performance indicators but also the potential implications on renegotiation of existing leases or on an entity’s financing strategy.