Introduction to IFRS 16 (Leases)
IFRS 16 establishes the rules for the recognition, measurement, and disclosure of leases for both lessors and lessees.
The IASB issued IFRS 16 in January of 2016 (it replaced IAS 17).
IFRS 16 had a substantial impact on the accounting for lessees because it requires lessees to capitalize all leases (with two exceptions). This means lessees must recognize a right-of-use asset and a lease liability upon commencement of a lease.
The goal of IFRS 16 was to increase transparency in financial reporting. Prior to IFRS 16, lessees could structure leases so that the lease liability didn't appear on their statement of financial position (aka balance sheet). Thus, leases were used as a means of off-balance sheet financing (to keep debt off a company's balance sheet).
IFRS 16 affects the the financial statements of lessees in the following ways:
(1) they will report higher total assets and total liabilities than they would have reported under the old accounting rules
(2) expenses will be front-loaded, because more interest expense will be recognized in the early years of the lease when the lease liability is higher
(3) they will report a higher EBITDA than they would have reported under the old accounting rules
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Пікірлер: 23
I’m a chartered accountant from India.I have to say your videos are excellent.I’ve not seen anyone else explaining so well with examples and reasoning behind a concept. I’m a person who needs to know the logic behind everything and I really appreciate your videos.
@Edspira
Жыл бұрын
Thank you for such kind words. I'm glad you found the examples and rationale helpful. I work really hard to create quality videos so it means a lot when people notice. Thank you!
My gratitude goes to you for the amazing videos on accounting you put out. They explain even the most difficult things in the clearest way possible. Thanks!
One of the best IFRS videos
@Edspira
3 жыл бұрын
Thank you!
You make boring but important topics really interesting and easy to absorb thru all these cool presentations and lively voice over. Thank you very much.
you have a gift for explaining things crystally clear
@Edspira
2 жыл бұрын
Thank you!
Wow just my luck I'm learning ifrs 16 right now! Can't wait for the next videos on the topic, you explain so clearly
@Edspira
3 жыл бұрын
Awesome!
So much better than my uni education :')
Thank u so much for ur explanations !
Excellent video, thank you
Thank you Professor.
OMG I DIDNT KNOW YOU DID IFRS VIDEOS 😍❤️
@Edspira
3 жыл бұрын
😀
Does IFRS 16 affect retail businesses when renting properties?
General question, but what’s the logic for including dismantling costs as part of an asset? Appreciate that it spreads the cost over a period of time rather than recognising it in the P&L upfront but i can’t get my head around why the costs are an ‘asset’ from a logical standpoint
@Edspira
2 жыл бұрын
One way of looking at it is that those costs are part of the cost of placing the asset into service (e.g., if you're going to build a nuclear power plant, you're acknowledging that the cost doesn't just include the cost of building the plant but also the cost of one day being forced to disassemble the nuclear reactor)
Thanks nice video, please do show some examples too.
@Edspira
2 жыл бұрын
No problem, I have made other videos with examples for IFRS 16
I love you so much
@Edspira
2 жыл бұрын
🌹