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From 2019, the accounting treatment of leases by lessees will change fundamentally.
FRS 116 Leases (‘new standard’) eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. In short, all leases will be on balance sheet.
In this issue, we provide insights for new lease accounting model for lessee and lessor, impact on the lessee’s financial statements and financial ratios, new lease definition and recognition exemptions, transition options, and tax treatment of leases under the new standard