IFRS 16 Leases

IFRS 16 Leases introduction

IFRS 16 Leases gets critical changes in accounting requirements for lease accounting, essentially for lessees. IFRS 16 replaces the current suite of norms and elucidations on leases:

  • IAS 17 Leases (IAS 17)
  • IFRIC 4 Determining whether an Arrangement contains a Lease (IFRIC 4)
  • SIC 15 Operating Leases – Incentives (SIC 15)
  • SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease (SIC 27).

This KGRN IFRS 16 Leases in Practice sets out the requirements of IFRS 16 in connection to the characterization and estimation of leases from residents and lessors and analyzes those necessities to the past guidelines, essentially IAS 17. It ought to be noticed that the direction identifying with lessor accounting remains to a great scope unaltered from IAS 17, so the focal point of this production is on the requirements for Lessees.

IFRS 16 leases enquires call @ +971 45 570 204 / Email Us : support@kgrnaudit.com

The need for IFRS 16 Leases

Those necessities are outlined as:


Practically all IFRS 16 Leases are perceived in the announcement of the financial-related situation as a ‘right-of-utilization’ resource and a lease risk. There are thin special cases to this acknowledgment guideline for leases where the fundamental resource is of low worth and for the present moment

IFRS 16 Leases (for example those with a lease term of a year or less).The benefit is in this manner represented as per the expense or revaluation model in IAS 16 Property, Plant and Equipment (IAS 16) or, if the privilege of utilization resource meets the meaning of speculation property, as per the necessities of IAS 40 Investment Property (the reasonable worth model is required if the lessee estimates venture property at reasonable worth). The obligation and right-of-utilization IFRS 16 Leases resource are loosened up over the term of the lease offering ascend to an intriguing cost and deterioration charge, individually.


As noted over the direction identifying with IFRS 16 lessors remains considerably unaltered from IAS 17. Lessor keep on representing leases as either financial lease Vs operating lease relying upon whether the lease moves considerably every one of the dangers and prizes coincidental to responsibility for basic advantage for the lessee. An IFRS 16 Leases special case is middle of the road lessors, where the order of the sublease is resolved regarding the transitional lessor’s privilege of utilization resource and not the whole hidden resource.

Operating leases

Operating leases keep on being recorded as resources in the announcement of financial-related position and lease pay is perceived on a straight line premise over the lease term. For fund leases, a lessor is required to derecognize the hidden resource and record a receivable equivalent to the net interest in the lease, with addition or shortfall marked down. Account salary is accordingly perceived at the financing cost understood in the lease over the lease term.

IFRS 16 leases enquires call @ +971 45 570 204 / Email Us : support@kgrnaudit.com

Effective date IFRS 16 Leases

The Effective date of IFRS 16 Leases is for yearly revealing periods starting on or after 1 January 2019. For Lessees, there is a decision of full review application (for example restatement comparatives as though IFRS 16 had consistently been in power), or review application without restatement of earlier year comparatives. This IFRS 16 Leases outcomes in the total effect of selection being recorded as an acclimation to value toward the start of the accounting time frame in which the standard is first applied (the date of beginning application).

Early selection of IFRS 16 is allowed, yet elements choosing to do so should likewise apply IFRS 15 Revenue from Contracts with Customers (IFRS 15) simultaneously. Elements that do choose to early embrace IFRS 16 and apply IFRS 15 simultaneously can pick distinctive progress strategies for every standard. For instance, an element that picks the adjusted review approach under IFRS 15 can utilize the complete review approach under IFRS 16 Leases. The progress decisions need not be the equivalent under the two gauges.

Comparison with US GAAP

IFRS 16 Leases started as a joint undertaking between the International Accounting Standards Board (IASB) and its US partner, the Financial Accounting Standards Board (FASB). Notwithstanding, the Boards didn’t concur on certain focuses and, eventually, the FASB’s standard contrasts from the IASB’s in that the FASB’s standard holds unmistakable classes of leases for residents with various accounting requirements.

Scope of IFRS 16

The scope of IFRS 16 Leases is extensively like IAS 17 in that it applies to contracts meeting the meaning of a lease (see Section 3.), aside from:

(a) Leases to investigate for or use minerals, oil, gaseous petrol, and comparable non-regenerative assets;

(b) Leases of organic resources inside the scope of IAS 41 Agriculture held by a lessee;

(c) Service concession game plans inside the scope of IFRIC 12 Service Concession Arrangements;

(d) Licenses of protected innovation conceded by a lessor inside the scope of IFRS 15; and
(e) Rights held by a lessee under permitting understandings inside the scope of IAS 38 Intangible Assets (IAS 38) for such things as movie films, video chronicles, plays, original copies, licenses, and copyrights.

Acknowledgment Exemptions

Notwithstanding the above degree prohibitions, a resident can choose not to apply IFRS 16’s acknowledgment and estimation necessities to:

(a) Short-term leases; and

(b) Leases for which the fundamental resource is of low worth (‘low worth leases’).

The Short-term IFRS 16 Leases exception must be applied reliably to every basic resource in a similar class. The low worth lease exception, conversely, might be applied on a lease by-lease premise.

If an element applies either exception, it must unveil that reality and certain data to make the impact of the exclusion known to clients of its budget reports

IFRS 16 enquires call @ +971 45 570 204 / Email Us : support@kgrnaudit.com

Short-term Leases

Short-term leases are characterized as ‘leases that, at the beginning date, have a lease term of a year or less. A lease that contains a buy alternative is anything but a Short-term lease.’

Leases of Low-Value Assets

The evaluation of ‘low worth’ for a leased resource is to be made based on the estimation of an advantage when it is (or was) new, paying little heed to whether the real resource being leased is new. Moreover, the appraisal is made paying little respect to whether the leased resource is material to the lessee. This direction is intended to accomplish the objective that various Lessees should arrive at similar resolutions identifying with fundamental resources, paying little heed to their size, nature or conditions.

A fundamental resource in a lease can be of low worth just if:

(a) The IFRS 16 Leases can profit by the utilization of the fundamental resource all alone or together with different assets that are promptly accessible to the resident; and

(b) The hidden resource isn’t exceptionally subject to, or profoundly interrelated with, different resources.

This implies an IFRS 16 Leases can’t guarantee that, for instance, an airship or a vehicle are involved countless low worth things (singular parts) because, with regards to the general Operating resource, these segments are profoundly reliant on and interrelated with one another.
IFRS 16 Leases gives instances of low worth leases, which incorporate tablets and PCs, little things of office furniture and phones.

Lease Modifications

Lease alterations emerge from changes to the fundamental agreement concurred between the lessee and the lessor consequent to the beginning of the lease. The representing IFRS 16 Leases the alteration relies upon whether the adjusted terms increment or decline the scope of the lease, and whether increments in scope expect thought to be paid that is equivalent with an ‘independent cost’ for the new scope of the lease.

Lessor Accounting

The accounting necessities in IFRS 16 for lessors are unaltered in many regards from IAS 17. Leases that move significantly the entirety of the dangers and prizes accidental to responsibility for the basic resource are fund leases. Every single other IFRS 16 Leases are Operating leases.

The mainland that may influence lessors is those where IFRS 16 Leases grows direction or gives direction on issues not recently tended to in IAS 17.

Clarification that variable installments that rely upon a file or a rate are calculated into the meaning of lease installments thus could affect the evaluation regarding whether the present estimation of the lease installments adds up to significantly the entirety of the reasonable estimation of the fundamental resource for the motivations behind grouping a lease as an account lease or Operating lease;

  • Revised deal and-leaseback direction
  • Separation of lease and non-lease parts in an agreement
  • Sub-lease direction
  • Guidance on lease adjustments and
  • Enhanced revelation requirements

IFRS 16 enquires call @ +971 45 570 204 / Email Us : support@kgrnaudit.com

KGRN IFRS 16 leases approach

IFRS 16 leasesThe implementation challenges require a review of all existing and potential lease contracts, extraction of data, making broad calculations and bringing in judgments and estimates.

KGRN IFRS 16 leases strategy

• Assessment, Identification, and classification of lease contracts
• Identifying nonlease (service) components
• Computation of transitional adjustments
• Support on estimates and judgments Reconsidering changing contract terms
• System and process changes
• Presentation requirements

KGRN IFRS 16 statement of purpose

KGRN central goal is to create IFRS 16 Standards that bring straightforwardness, responsibility, and effectiveness to money related markets the world over. Our work serves general society enthusiasm by encouraging trust, development and long haul money related solidness in the worldwide economy.

IFRS 16 leases Standards bring straightforwardness by improving the worldwide equivalence and nature of financial data, empowering financial specialists and other market members to settle on educated monetary choices.

IFRS 16 leases Standards reinforce responsibility by decreasing the data hole between the suppliers of capital and the individuals to whom they have depended on their cash. Our Standards give data expected to consider the executives responsible. As a wellspring of all-inclusive practically identical data, IFRS 16 Standards are likewise of crucial significance to controllers around the globe.

IFRS 16 Standards add to productivity by helping speculators to distinguish openings and dangers over the world, therefore improving capital distribution. Utilization of a solitary believed bookkeeping language brings down the expense of capital and decreases worldwide announcing costs for organizations.

IFRS 16 Standards are as of now required more than 140 purviews and allowed in some more. Discover increasingly about the utilization of IFRS Standards around the globe here.

IFRS 16 enquires call @ +971 45 570 204 / Email Us : support@kgrnaudit.com

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Frequently Asked Questions

What is a lease IFRS 16?

IFRS 16 denotes the first main renovation of lease accounting in over 30 years. Below IFRS 16 a lease is definite as ‘a bond, or part of a agreement, that carries the right to use an asset for a period of interval in exchange for consideration’.

What does IFRS 16 do?

IFRS 16 is an International Financial Reporting Standard (IFRS) transmitted by the International Accounting Standards Board (IASB) on condition that control on accounting for leases. It will also increase comparability among companies that lease and those that use to buy.

When IFRS 16 is effective?

Effective date of IFRS 16 Leases was delivered by the IASB on 13 January 2016 and is effective for times start on or after 1 January 2019, with previous adoption allowed if IFRS 15 Revenue from Agreements with Clients has also been applied.

Why IFRS 16 is introduced?

The IASB has issued IFRS 16 the new leases standard. It originates into outcome on 1 January 2019. Almost every company uses rentals or leasing as a earnings to gain access to assets and will therefore be affected by the new standard.

How will IFRS 16 affect businesses?

The summary of IFRS 16 Leases will lead to an increase in leased assets and financial charges on the balance sheet of the lessee, while EBITDA of the lessee rises as well. Although equity values would not change, enterprise standards of companies will rise.

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