Gross domestic product and IFRS 16: Difference between pages

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imported>Doug Williamson
(Number the three ways to measure GDP.)
 
imported>Doug Williamson
(Incorporate detail from ACT Policy and Technical summary.)
 
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(GDP).  
International Financial Reporting Standard 16, dealing with leases.


A measure of the monetary value of total output of finished goods and services produced using factors of production located in the country whose GDP is being measured in the time period over which it is being measured.  
IFRS 16 replaces IAS 17: Leases.


It is commonly measured in three ways.
IFRS 16 is mandatory - for companies reporting under international financial reporting standards - from 1 January 2019.  
#An output measure: the value of goods and services produced by all sectors of the economy, often taken as agriculture, manufacturing, energy, construction, the service sector and government.
#An expenditure measure: the value of the goods and services purchased by households and governments, investment in machinery and buildings and exports minus imports.
#An income measure: the value of income generated mostly in terms of profits and wages.




In principle the three methods should produce the same answer, but they are each estimated in ways that are practical but not quite fitting the theory.  
IFRS 16 requires most lease liabilities to be accounted for 'on balance sheet'.


Indeed how the theory should be applied is often disputable.  
This change will remove the former distinction between [[operating lease]]s and [[finance lease]]s.


Some of this is discussed in the article on [[inflation]].


Broadly speaking, IFRS 16 requires all leases to be recognised on the balance sheet, other than short term leases or those for low value assets. The leases to be brought 'on balance sheet' under IFRS 16 include most operating leases that are currently 'off balance sheet' under IAS 17.


GDP equivalents can also be estimated for regions.
IFRS 16 will lead to increased transparency and improved comparability between companies that lease and companies that borrow to buy assets. However, for many companies IFRS 16 will result in a material restatement of their balance sheets.


This will normally impact any financial covenant ratios that include ‘debt’, ‘net worth’ or similar indicators, subject to any 'frozen GAAP' provisions. EBITDA and the interest cover ratio are also likely to be impacted.


== See also ==
 
* [[Double dip]]
IFRS 16 is issued by the International Accounting Standards Board.
* [[Gross national product]]
 
* [[Recession]]
 
* [[Inflation]] -  see 'Points to note'
==See also==
* [[Black economy]]
*[[Finance lease]]
*[[Operating lease]]
*[[IAS 17]]
*[[Lease]]
*[[Debt]]
*[[EBITDA]]
*[[Frozen GAAP]]
*[[Interest cover]]
*[[Net worth]]
*[[International Financial Reporting Standards]]

Revision as of 21:27, 20 January 2016

International Financial Reporting Standard 16, dealing with leases.

IFRS 16 replaces IAS 17: Leases.

IFRS 16 is mandatory - for companies reporting under international financial reporting standards - from 1 January 2019.


IFRS 16 requires most lease liabilities to be accounted for 'on balance sheet'.

This change will remove the former distinction between operating leases and finance leases.


Broadly speaking, IFRS 16 requires all leases to be recognised on the balance sheet, other than short term leases or those for low value assets. The leases to be brought 'on balance sheet' under IFRS 16 include most operating leases that are currently 'off balance sheet' under IAS 17.

IFRS 16 will lead to increased transparency and improved comparability between companies that lease and companies that borrow to buy assets. However, for many companies IFRS 16 will result in a material restatement of their balance sheets.

This will normally impact any financial covenant ratios that include ‘debt’, ‘net worth’ or similar indicators, subject to any 'frozen GAAP' provisions. EBITDA and the interest cover ratio are also likely to be impacted.


IFRS 16 is issued by the International Accounting Standards Board.


See also

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