Introduction to IFRS 16 (Leases)

IFRS 16 establishes the rules for the recognition, measurement, and disclosure of leases for both lessors and lessees.

The IASB issued IFRS 16 in January of 2016 (it replaced IAS 17).

IFRS 16 had a substantial impact on the accounting for lessees because it requires lessees to capitalize all leases (with two exceptions). This means lessees must recognize a right-of-use asset and a lease liability upon commencement of a lease.

The goal of IFRS 16 was to increase transparency in financial reporting. Prior to IFRS 16, lessees could structure leases so that the lease liability didn't appear on their statement of financial position (aka balance sheet). Thus, leases were used as a means of off-balance sheet financing (to keep debt off a company's balance sheet).

IFRS 16 affects the the financial statements of lessees in the following ways:
(1) they will report higher total assets and total liabilities than they would have reported under the old accounting rules
(2) expenses will be front-loaded, because more interest expense will be recognized in the early years of the lease when the lease liability is higher
(3) they will report a higher EBITDA than they would have reported under the old accounting rules
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[minivalsankattungal]

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[johnpaul]

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[prosperitymagnet]

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[ff-pvfb]

you have a gift for explaining things crystally clear

[jothenater]

Wow just my luck I'm learning ifrs 16 right now! Can't wait for the next videos on the topic, you explain so clearly

[freddiewadling]

So much better than my uni education :')

[Gdragon]

OMG I DIDNT KNOW YOU DID IFRS VIDEOS 😍❤️

[jgibbs]

General question, but what’s the logic for including dismantling costs as part of an asset? Appreciate that it spreads the cost over a period of time rather than recognising it in the P&L upfront but i can’t get my head around why the costs are an ‘asset’ from a logical standpoint

[PLock-ccml]

Thanks nice video, please do show some examples too.

[vladimirstanojlovic]

Does IFRS 16 affect retail businesses when renting properties?