IFRS 16 and Official Bank Rate: Difference between pages

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(Spacing and add 'grossing-up' expressly.)
 
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International Financial Reporting Standard 16, dealing with leases.
1. ''UK.''


IFRS 16 replaces IAS 17: Leases.
The official reference interest rate for the UK determined by the Bank of England's Monetary Policy Committee (MPC).


IFRS 16 is mandatory - for companies reporting under international financial reporting standards - from 1 January 2019.  
The Official Bank Rate is the rate used for certain key transactions between the Bank of England ('the Bank') and financial institutions.


It is designed to have the effect of determining the level of near risk-free interest rates throughout the UK financial sector.


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


This change will remove the former distinction between [[operating lease]]s and [[finance lease]]s.
It is used by many financial institutions when setting interest rates for certain of their products.




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 Official Bank Rate is often known - externally to the Bank - as the 'Bank of England Base Rate' (BBR).
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.
Within the Bank of England, it is often abbreviated to 'the Bank Rate'.


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.


2.  ''International.''


IFRS 16 is issued by the International Accounting Standards Board.
Similar interest rates in other jurisdictions.




==See also==
== See also ==
*[[Finance lease]]
* [[Bank of England]]
*[[Operating lease]]
* [[Bank Rate]]
*[[IAS 17]]
* [[Base rate]]
*[[Lease]]
* [[Inflation target]]
*[[Debt]]
* [[Jurisdiction]]
*[[EBITDA]]
* [[Monetary Policy Committee]] (MPC)
*[[Frozen GAAP]]
* [[MLR]]
*[[Interest cover]]
* [[Reference rate]]
*[[Net worth]]
* [[Term Funding Scheme]]
*[[International Financial Reporting Standards]]
 
 
==External link==
*[https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate The Bank Rate - Bank of England]
 
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Corporate_finance]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Cash_management]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]

Latest revision as of 00:26, 27 January 2022

1. UK.

The official reference interest rate for the UK determined by the Bank of England's Monetary Policy Committee (MPC).

The Official Bank Rate is the rate used for certain key transactions between the Bank of England ('the Bank') and financial institutions.

It is designed to have the effect of determining the level of near risk-free interest rates throughout the UK financial sector.


It is used by many financial institutions when setting interest rates for certain of their products.


The Official Bank Rate is often known - externally to the Bank - as the 'Bank of England Base Rate' (BBR).

Within the Bank of England, it is often abbreviated to 'the Bank Rate'.


2. International.

Similar interest rates in other jurisdictions.


See also


External link

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