Effective from annual reporting periods beginning on or after 1 January 2019, International Financial Reporting Standards (IFRS) 16 introduces a single lessee accounting model, with earlier application permitted (as long as IFRS 15 is also applied).
Unlike the previous lease standard (IAS 17), IFRS 16 does not include a lease-classification test for lessees. As a result, lessees account for all leases on the statement of financial position by recognising a right-of-use asset and a lease liability (other than leases that qualify for one of the recognition exemptions).
Because leases will be recognised on the statement of financial position, amortisation will be accounted for over the useful life of the right-of-use asset (generally the shorter of the lease term or the useful life of the asset). Finance costs will be recognised and will increase the carrying amount of the lease liability over the period of the lease. The lease payments made during the course of the financial year will result in a reduction to the carrying amount of the lease liability.
From a tax perspective, consideration of applicability of certain provisions (including sections 12C, 11(e), and 11(a) of the Income Tax Act No. 58 of 1962) is needed to determine the correct amount deductible in the tax computation, as well as the relevant adjustments that must be made.
Read a November 2019 report [PDF 111 KB] prepared by the KPMG member firm in South Africa
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.