Free market and IFRS 16: Difference between pages

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imported>Doug Williamson
(Spacing and add 'grossing-up' expressly.)
 
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''Economics.''
International Financial Reporting Standard 16, dealing with leases.


A free market is an economy - or part of an economy - where resources are allocated by the market by means of the market mechanism.
IFRS 16 replaces IAS 17: Leases.


Relatively free markets are an essential element of capitalism.
IFRS 16 is mandatory - for companies reporting under international financial reporting standards - from 1 January 2019.  




== See also ==
IFRS 16 requires most lease liabilities to be accounted for 'on balance sheet'.
* [[Capitalism]]
* [[Competition]]
* [[Four freedoms]]
* [[Fully planned economy]]
* [[Market mechanism]]
* [[Mixed economy]]
* [[Regulation]]
* [[Thatcherism]]


[[Category:Corporate_finance]]
This change will remove the former distinction between [[operating lease]]s and [[finance lease]]s.
[[Category:Long_term_funding]]
 
 
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 'grossing-up' 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==
*[[Finance lease]]
*[[Operating lease]]
*[[IAS 17]]
*[[Lease]]
*[[Debt]]
*[[EBITDA]]
*[[Frozen GAAP]]
*[[Interest cover]]
*[[Net worth]]
*[[International Financial Reporting Standards]]

Revision as of 10:29, 8 February 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 'grossing-up' 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