IFRS 16 – LEASES
Dissertation
by
STUDENT FULL NAME (ICB Member ID: …..)
submitted in partial fulfilment of the requirements for the National Diploma:
FINANCIAL ACCOUNTING (SAQA ID: 20366)
December 2025
DECLARATION BY STUDENT:
I declare that this dissertation, submitted by me, is entirely my own work, that l have not
used any AI tools, I have properly referenced all the sources used, and that no part was
previously submitted at any other institution.
Signature _____________________ Date _____________________
,Acknowledgements
First and foremost, I would like to thank my family during the previous few years for their
encouragement and support during my studies. Their encouragement has been an incredible
source of strength and motivation for me. And I cannot express how much their sacrifices,
including countless hours dedicated to helping me achieve this goal, mean to me. They have
been a steadfast rock of support.
I extend my sincere appreciation to my advisor and editor for their exceptional guidance and
valuable feedback, which enhanced this research.
,Table of Contents
Title page ............................................................................................................................. 1
Acknowledgements ............................................................................................................ 2
Table of Figures .................................................................................................................. 5
Chapter 1: Research Overview (Introduction)................................................................... 6
1.1 Abstract ....................................................................................................................... 6
1.2 Purpose ....................................................................................................................... 7
1.3 Research method ........................................................................................................ 7
1.4 Frame of reference ...................................................................................................... 7
1.5 Research results and analysis ..................................................................................... 8
1.6 International critiques conclusion ................................................................................. 8
1.6.1 Recording of asset ................................................................................................ 8
1.6.2 Lease liability ........................................................................................................ 9
1.7 Research structure ...................................................................................................... 9
Chapter 2: Brief Overview of IFRS 16 (Standard)............................................................ 10
2.1 Objective and scope of IFRS 16 ................................................................................ 11
2.1.1 Scope of the standard ......................................................................................... 12
2.2 Recognition of IFRS 16 .............................................................................................. 14
2.3 Leases recognition..................................................................................................... 15
2.3.1 Initial recognition ................................................................................................. 15
2.3.2 Initial measurement of Leases ............................................................................ 15
2.3.2.1 Initial measurement of the Right-of-Use (RoU) asset ................................... 15
2.3.2.2 Components of the Right-of-Use (RoU) asset .............................................. 16
2.3.3 Initial measurement of the lease liability .............................................................. 16
2.3.3.1 Components of the lease liability ................................................................. 16
2.3.4 Subsequent measurement of the Right-of-Use (RoU) asset ................................ 17
2.3.4.1 Elements of cost .......................................................................................... 17
2.3.4.2 Depreciation ................................................................................................ 18
2.3.4.3 Impairment................................................................................................... 18
2.3.4.4 Fair value and revaluation model ................................................................. 18
2.3.5 Subsequent measurement of the lease liability ................................................... 19
2.3.5.1 Accruing interest on the lease liability .......................................................... 19
2.3.5.2 Lease payments .......................................................................................... 19
2.3.5.3 Reassessments of the lease liability ............................................................ 19
2.4 Presentation and disclosure....................................................................................... 20
3
, 2.4.1 Presentation ........................................................................................................ 20
2.4.2 Disclosures ......................................................................................................... 21
Chapter 3: Positive International Critiques (Perceived strengths) ............................... 23
3.1 This Effect Analysis goes with, but is not part of, IFRS 16 ......................................... 23
3.2 Benefits for investors and analysts ............................................................................ 23
3.3 Benefits for companies .............................................................................................. 24
3.4 ‘Non-GAAP’ information ............................................................................................. 24
3.5 Improved decision-making ......................................................................................... 25
3.6 Leases and borrowings to buy assets ........................................................................ 26
3.7 On and off-balance sheet lease ................................................................................. 26
3.8 Variable lease payments............................................................................................ 27
3.9 Optional payments..................................................................................................... 28
3.10 Key cost reliefs ........................................................................................................ 28
3.11 Exemptions .............................................................................................................. 29
Chapter 4: Negative International Critiques (Perceived weaknesses) ......................... 30
4.1 Main challenges and affects ...................................................................................... 30
4.2 Challenges for lessees .............................................................................................. 30
4.3 Challenges for lessors ............................................................................................... 37
4.4 Discussion on the changes and challenges of IFRS 16 in the light of substance over
form ................................................................................................................................. 38
Chapter 5: International Conclusion, and recommended improvements of IFRS 16 .. 45
Final Considerations ........................................................................................................ 45
Bibliography ..................................................................................................................... 48
Section Citations .............................................................................................................. 55
Figure Sources ................................................................................................................. 56
References ....................................................................................................................... 57
4
Dissertation
by
STUDENT FULL NAME (ICB Member ID: …..)
submitted in partial fulfilment of the requirements for the National Diploma:
FINANCIAL ACCOUNTING (SAQA ID: 20366)
December 2025
DECLARATION BY STUDENT:
I declare that this dissertation, submitted by me, is entirely my own work, that l have not
used any AI tools, I have properly referenced all the sources used, and that no part was
previously submitted at any other institution.
Signature _____________________ Date _____________________
,Acknowledgements
First and foremost, I would like to thank my family during the previous few years for their
encouragement and support during my studies. Their encouragement has been an incredible
source of strength and motivation for me. And I cannot express how much their sacrifices,
including countless hours dedicated to helping me achieve this goal, mean to me. They have
been a steadfast rock of support.
I extend my sincere appreciation to my advisor and editor for their exceptional guidance and
valuable feedback, which enhanced this research.
,Table of Contents
Title page ............................................................................................................................. 1
Acknowledgements ............................................................................................................ 2
Table of Figures .................................................................................................................. 5
Chapter 1: Research Overview (Introduction)................................................................... 6
1.1 Abstract ....................................................................................................................... 6
1.2 Purpose ....................................................................................................................... 7
1.3 Research method ........................................................................................................ 7
1.4 Frame of reference ...................................................................................................... 7
1.5 Research results and analysis ..................................................................................... 8
1.6 International critiques conclusion ................................................................................. 8
1.6.1 Recording of asset ................................................................................................ 8
1.6.2 Lease liability ........................................................................................................ 9
1.7 Research structure ...................................................................................................... 9
Chapter 2: Brief Overview of IFRS 16 (Standard)............................................................ 10
2.1 Objective and scope of IFRS 16 ................................................................................ 11
2.1.1 Scope of the standard ......................................................................................... 12
2.2 Recognition of IFRS 16 .............................................................................................. 14
2.3 Leases recognition..................................................................................................... 15
2.3.1 Initial recognition ................................................................................................. 15
2.3.2 Initial measurement of Leases ............................................................................ 15
2.3.2.1 Initial measurement of the Right-of-Use (RoU) asset ................................... 15
2.3.2.2 Components of the Right-of-Use (RoU) asset .............................................. 16
2.3.3 Initial measurement of the lease liability .............................................................. 16
2.3.3.1 Components of the lease liability ................................................................. 16
2.3.4 Subsequent measurement of the Right-of-Use (RoU) asset ................................ 17
2.3.4.1 Elements of cost .......................................................................................... 17
2.3.4.2 Depreciation ................................................................................................ 18
2.3.4.3 Impairment................................................................................................... 18
2.3.4.4 Fair value and revaluation model ................................................................. 18
2.3.5 Subsequent measurement of the lease liability ................................................... 19
2.3.5.1 Accruing interest on the lease liability .......................................................... 19
2.3.5.2 Lease payments .......................................................................................... 19
2.3.5.3 Reassessments of the lease liability ............................................................ 19
2.4 Presentation and disclosure....................................................................................... 20
3
, 2.4.1 Presentation ........................................................................................................ 20
2.4.2 Disclosures ......................................................................................................... 21
Chapter 3: Positive International Critiques (Perceived strengths) ............................... 23
3.1 This Effect Analysis goes with, but is not part of, IFRS 16 ......................................... 23
3.2 Benefits for investors and analysts ............................................................................ 23
3.3 Benefits for companies .............................................................................................. 24
3.4 ‘Non-GAAP’ information ............................................................................................. 24
3.5 Improved decision-making ......................................................................................... 25
3.6 Leases and borrowings to buy assets ........................................................................ 26
3.7 On and off-balance sheet lease ................................................................................. 26
3.8 Variable lease payments............................................................................................ 27
3.9 Optional payments..................................................................................................... 28
3.10 Key cost reliefs ........................................................................................................ 28
3.11 Exemptions .............................................................................................................. 29
Chapter 4: Negative International Critiques (Perceived weaknesses) ......................... 30
4.1 Main challenges and affects ...................................................................................... 30
4.2 Challenges for lessees .............................................................................................. 30
4.3 Challenges for lessors ............................................................................................... 37
4.4 Discussion on the changes and challenges of IFRS 16 in the light of substance over
form ................................................................................................................................. 38
Chapter 5: International Conclusion, and recommended improvements of IFRS 16 .. 45
Final Considerations ........................................................................................................ 45
Bibliography ..................................................................................................................... 48
Section Citations .............................................................................................................. 55
Figure Sources ................................................................................................................. 56
References ....................................................................................................................... 57
4
