The new lease accounting standard, IFRS 16, is now in effect. Many companies are still getting to grips with the changes to their financial reporting, with all leases coming onto the balance sheet for the first time. But beyond initial implementation, IFRS 16 is also enabling companies to capitalise on the transparency the new standard is delivering.
Since the International Accounting Standards Board (IASB) published IFRS 16 Leases in January 2016, treasurers and CFOs have been working hard to become compliant with the new standard. It replaces IAS 17 and is applicable for accounting periods beginning on or after January 1 2019, unless previously early adopted with IFRS 15.
IFRS 16 has been a major change for lessees, since the vast majority of leases that were previously treated as operating leases are now coming onto the balance sheet. To give a sense of scale here, the IASB estimated that approximately USD$3tr. of assets and liabilities will transfer onto corporate balance sheets in the coming years as a result of IFRS 16.