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What is the relation between IAS 17 and IFRS 16?
IFRS 16 replaces IAS 17. The International Accounting Standards Board (IASB) judges that its implementation will provide greater transparency by providing a clearer view of the assets and liabilities of companies. The vast majority of lease commitments are not currently included in the balance sheet of companies.
What is the effective date of the new IFRS 16 standard?
The IASB issued the new accounting standard “IFRS 16 – Leases” on January 13th, 2016. It will come into effect on January 1st, 2019.
What are the benefits of IFRS 16?
The application of this standard will provide:
• More transparency on rentals in the financial statements of companies
• A more accurate representation of company assets and liabilities
• A better distinction between companies that use leasing to employ an assets and borrowers to acquire assets
No change in the amount of cash transferred between the parties to the lease.
IFRS 16 therefore has no impact on the total amount of cash flows recognized. On the other hand, there will be consequences on the presentation of cash flows for previously simple (off-balance sheet) leases.
Under IFRS 16, cash flows from operations will be reduced with a corresponding increase in financing flows compared to amounts in accordance with IAS 17. By applying IAS 17, companies report cash flows from simple lease as operating flows. By applying IFRS 16, repayments of lease liabilities will be included in financing flows. Interest may be classified as financing activities in accordance with IFRS
How to keep up to date on IFRS 16 - Leases?
To avoid missing out on IFRS 16 Contract rental, you can follow these 2 sites: