Q1: What is IFRS 16?
IFRS 16 is an International Financial Reporting Standard that provides guidance on accounting for leases. It replaces the previous lease accounting standard, IAS 17.
Q2: When is IFRS 16 effective?
IFRS 16 became effective for annual reporting periods beginning on or after January 1, 2019.
Q3: What is the core principle of IFRS 16?
The core principle of IFRS 16 is that an entity should recognize assets and liabilities arising from a lease on the balance sheet.
Q4: How does IFRS 16 define a lease?
IFRS 16 defines a lease as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.
Q5: What is the lessee accounting model under IFRS 16?
The lessee accounting model under IFRS 16 requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with a term of more than 12 months, except for leases of low-value assets.
Q6: How does IFRS 16 address variable lease payments?
IFRS 16 requires a lessee to include variable lease payments in the measurement of the lease liability and right-of-use asset, to the extent that they depend on an index or rate. Other variable lease payments are recognized in profit or loss in the period in which they occur.
Q7: What is the lessor accounting model under IFRS 16?
The lessor accounting model under IFRS 16 is similar to the lessor accounting model under IAS 17. A lessor must classify each lease as either an operating lease or a finance lease and account for it accordingly.
Q8: What are the disclosure requirements under IFRS 16?
The disclosure requirements under IFRS 16 include information about an entity's leases, including lease income, lease expense, and the maturity profile of lease liabilities.
Q9: What is the impact of IFRS 16 on financial statements?
IFRS 16 has a significant impact on an entity's financial statements, as it requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. This can affect key financial ratios, such as debt-to-equity and interest coverage ratios. Additionally, entities may need to revise their accounting policies and processes, and disclose more detailed information about their lease arrangements.