imported>Doug Williamson |
imported>Doug Williamson |
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| International Financial Reporting Standard 16, dealing with leases.
| | Superior Kerosene Oil. |
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| IFRS 16 replaces IAS 17: Leases.
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| IFRS 16 is mandatory - for companies reporting under international financial reporting standards - from 1 January 2019.
| | == See also == |
| | * [[Carbon tax]] |
| | * [[Carbon trading]] |
| | * [[CNG]] |
| | * [[Hydrocarbons]] |
| | * [[LDO]] |
| | * [[LNG]] |
| | * [[LPG]] |
| | * [[OPEC]] |
| | * [[Peak oil]] |
| | * [[Petrodollar]] |
| | * [[Petroyuan]] |
| | * [[Renewables]] |
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| | | [[Category:Ethics_and_corporate_governance]] |
| IFRS 16 requires most lease liabilities to be accounted for 'on balance sheet'.
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| This change removes the former distinction between [[operating lease]]s and [[finance lease]]s.
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| 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.
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| The leases to be brought 'on balance sheet' under IFRS 16 include most operating leases that were 'off balance sheet' under IAS 17.
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| IFRS 16 leads to increased transparency and improved comparability between companies that lease and companies that borrow to buy assets.
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| However, for many companies IFRS 16 results in material restatements of their balance sheets and - to a lesser extent - income statements.
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| The main balance sheet impact is to 'gross up' both assets and liabilities by the capital amounts of the leases.
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| The main income statement impact is to recognise a greater proportion of total costs in the earlier years of the lease. In other words, cost recognition is 'front-end loaded' under IFRS 16.
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| These restatements will normally impact any financial covenant ratios that include ‘debt’, ‘net worth’ or similar indicators, subject to any 'frozen GAAP' provisions.
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| EBITDA and the interest cover ratio are also likely to be impacted.
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| ==See also==
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| *[[ASU 2016-02 Leases (Topic 842)]]
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| *[[Debt]]
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| *[[DIA]]
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| *[[EBITDA]]
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| *[[Finance lease]]
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| *[[Frozen GAAP]]
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| *[[Hire purchase]]
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| *[[IAS 17]]
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| *[[Incremental borrowing rate]]
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| *[[Interest cover]]
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| *[[Interest rate implicit in a lease]]
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| *[[Lease]]
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| *[[Operating lease]]
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| *[[Off balance sheet]]
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| *[[Residual value]]
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| *[[Right of Use]]
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| ==Other resources==
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| *[https://www.treasurers.org/thetreasurer/definitive-guide-to-deriving-ifrs-16-discount-rates Definitive guide to deriving IFRS 16 discount rates: The Treasurer]
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| *[https://www.iasplus.com/en/standards/ifrs/ifrs-16 IFRS 16 - IAS Plus]
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| *[https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ifrs-16-leases.pdf?bypass=on IFRS 16 full text]
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| [[Category:Accounting,_tax_and_regulation]]
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| [[Category:Compliance_and_audit]] | |
