IFRS 16 Is Coming To Town!

Still recovering from IFRS 15 and IFRS 9 implementation for 2018 year-end financial statements? Well, don't relax just yet...It's time to gear up for the latest challenge: IFRS 16.

In its first mandatory year following ESMA's annual statement on enforcement priorities in October, here's what you need to know:

Lease term

Issuers are expected to provide sufficient disclosure on judgments made in determining the lease term, especially when the lease contract does not include specific terms on the termination, cancellation or renewal of the lease.

For info on lease term and useful life of non-removable leasehold improvements, check out the IFRC IC's recently published agenda decision.

Discount rate

According to IFRS 16, an incremental borrowing rate should be used to discount lease payments if the interest rate implicit in the lease cannot be readily determined. Well that's certainly easier said than done! Some issuers still seem to be struggling with how to determine the incremental borrowing rate...

If you're one of them, then don't miss this IFRS IC discussion on the topic.

Presentation...

IFRS 16 brings changes in the presentation of both primary financial statements and cash flow statements. Issuers should pay close attention to where they present:

right-of-use assets and lease liability interest expenses and depreciation charges cash payments for the principal interest portion of the lease liability ...and disclosures

Entity-specific is a must for relevant disclosures! Lessees should provide disclosures to enable users to assess the effect that leases have on their financial performance, cash flow and financial position. Not only quantitative, but...