IFRS 16
LEASES
, 👤 LESSEE’S PERSPECTIVE
OVERVIEW
The lessee is required to recognise an asset and liability on its SOFP
for all leased assets
Right-of-use asset treated i.t.o IAS16 asset with
depreciation and impairment
Lease liability treated i.t.o IFRS9 financial liability
at amortised cost
EXCEPT if the lessee elects one of the two recognition exemptions i.t.o
IFRS16:22-49
EXEMPTIONS APPLIED
EXEMPTIONS [22-49]
Lessee may elect to apply the requirements of this paragraph to:
o Short‐term leases (<12 months; no purchase option)
o Low value items [B3-B8]
In this case, they will not recognise a ROU asset and Lease liability
Treatment in Statements:
Lease Payments Expense in P/L on a straight-line basis over the lease term
(SOCI)
Not split between capital and interest
Accrued or Prepaid If CFs not equal, difference recognised in SOFP
Expense (SOFP) Prepaid expense: Actual PMT > Straight-Line Amt
Accrued Expense: Actual PMT < Straight-Line Amt
Tax implications:
Accounting Tax
Straight-line payments recognised as an Actual amounts paid i.t.o lease agreement will
expense in P/L - resulting in an prepaid or be allowed as a deduction in the YOA in which it
accrued expense recognised in SOFP. was paid in CASH, subject to limitations
imposed by Section 23H.
LEASES
, 👤 LESSEE’S PERSPECTIVE
OVERVIEW
The lessee is required to recognise an asset and liability on its SOFP
for all leased assets
Right-of-use asset treated i.t.o IAS16 asset with
depreciation and impairment
Lease liability treated i.t.o IFRS9 financial liability
at amortised cost
EXCEPT if the lessee elects one of the two recognition exemptions i.t.o
IFRS16:22-49
EXEMPTIONS APPLIED
EXEMPTIONS [22-49]
Lessee may elect to apply the requirements of this paragraph to:
o Short‐term leases (<12 months; no purchase option)
o Low value items [B3-B8]
In this case, they will not recognise a ROU asset and Lease liability
Treatment in Statements:
Lease Payments Expense in P/L on a straight-line basis over the lease term
(SOCI)
Not split between capital and interest
Accrued or Prepaid If CFs not equal, difference recognised in SOFP
Expense (SOFP) Prepaid expense: Actual PMT > Straight-Line Amt
Accrued Expense: Actual PMT < Straight-Line Amt
Tax implications:
Accounting Tax
Straight-line payments recognised as an Actual amounts paid i.t.o lease agreement will
expense in P/L - resulting in an prepaid or be allowed as a deduction in the YOA in which it
accrued expense recognised in SOFP. was paid in CASH, subject to limitations
imposed by Section 23H.
