IFRS 16 Leases, published by the International
Accounting Standard Board (IASB) in January 2016, has introduced
new requirements that organizations with leased assets must pay
attention to. The requirements set out principles for the
recognition, measurement, presentation and disclosure of all leases
and will take effect in January 2019. Earlier application is
permitted.
Impact
Previously, only finance leases were recorded on the balance
sheet; going forward operating leases must be recorded as well. For
some companies, such as retailers, airlines, transportation, and
energy, this could potentially become the one of the most material
items on the balance sheet.
IFRS 16 will cause significant changes to balance sheets, profit
& loss (P&L), and cash flow statements in certain
industries, as well as EBITDA and credit ratios, and consequently
may affect market sentiment, share prices, analyst coverage, and
credit ratings.
