Implementation projects are costly and data requirements extensive. But a careful use of transition options and practical expedients optimize the trade-offs between cost, timing and comparability – and your company’s profit in the post-transition years.
In January 2016, the IASB issued IFRS 16 Leases – a major step towards realizing its long-standing goal of bringing most leases on-balance sheet for lessees. IFRS 16 Leases includes a single lease accounting model for lessees and does not distinguish finance and operating leases anymore. All companies that lease major assets for use in their business will see an increase in reported assets and liabilities. The larger your lease portfolio, the more changes you may have to make to your systems and processes – starting with the creation of an inventory of all leases that are on transition to the new standard. To limit costs and ease the complexity of transition, the IFRS 16 includes several approaches, individual options and practical expedients that can be used independently, and in some cases, on a lease-by-lease basis.