IFRS-16 is the lease accounting standard
International Financial Reporting Standards (IFRS) are the accounting rules that govern publicly listed companies. At the start of 2019, IFRS-16 replaced IAS 17 for the accounting of leasing contracts. It applies to all companies that are obliged to publish under IFRS, and to all leases with an initial investment value above $5,000 USD and with a term longer than 12 months.
Frequently Asked Questions
How is IFRS-16 different?
The largest difference is that the lessee (the business leasing the vehicle) must now account for a right-of-use asset out of a lease contract on his balance sheet. This means that some financial components of the lease must sit on your company's books. However, the cost of additional services provided with the lease are not accounted for as an asset and only impact profit and loss statement on a monthly basis, like how they were with IAS 17.
Should my business buy our vehicles instead?
Operational leasing continues to be the first choice for many of our customers as the impact on balance sheet, risk positioning, and incorporated asset responsibilities are still lower than outright ownership of vehicles. The residual value at the end of the lease term is excluded from the balance sheet recognition, while we retain responsibility for all residual value related expertise.
Would it make more sense to avoid IFRS-16?
Alternative solutions, such as short-term rental, might lead to higher lease rates than more suitable long-term agreements. IFRS-16 is only truly avoided if none of the company's assets (including vehicles) qualify for IFRS-16 accounting.
How does Alphabet support me?
Our expert team are available to answer any questions you might have and are on hand to support you with industry experience on the implications of lease accounting.
For detailed design and introduction of your accounting processes under the new IFRS 16 you should also align in good time with your local auditor and/or financial system provider.