A guide to AASB 16 - Deloitte
Leases A guide to AASB 16
June 2016
This guide contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the "Deloitte Network") is, by means of this guide, rendering professional advice or services. Before making any decision or taking any action that might affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this guide.
? 2016. For information, contact Deloitte Touche Tohmatsu Limited.
Extracts from International Financial Reporting Standards and other International Accounting Standards Board material are reproduced with the permission of the IFRS Foundation.
Foreword
The International Accounting Standards Board issued IFRS 16 Leases (the new Standard) in January 2016. The new Standard introduces a new model requiring lessees to recognise all leases on balance sheet, except for short-term leases and leases of low value assets.
These changes were issued by the Australian Accounting Standards Board in February 2016 and are effective for periods beginning on or after 1 January 2019 i.e. 30 June 2020 year-ends for many Australian entities. Australian Accounting Standards (AASBs) are equivalent to International Financial Reporting Standards (IFRSs). Throughout this document where it refers to an IFRS or an International Accounting Standard (IAS), the equivalent AASB standard is applicable.
The pervasive use of leases means that we expect the changes to impact most Australian entities and especially those with significant operating leases of property, aircraft, manufacturing equipment, mining equipment, and logistics services.
To implement these changes entities will need a thorough understanding of the new requirements and their impacts on an entity's Balance Sheet, Income Statement and the Cash flow Statements. This guide has been designed to assist in understanding the requirements as entities begin thinking about transitioning to the new Standard.
This new Standard is however more than an accounting change. Recognition of increased lease liabilities on balance sheet is likely to focus more attention on leases at Board and management levels, including consideration of whether leasing is the most efficient means of obtaining access to assets and whether, and which, assets should be bought rather than leased.
Entities also need to consider a number of other implications, including:
? Impact on gearing and loan covenants ? Impact on key ratios and communication with stakeholders ? Impact on remuneration schemes, including bonuses and share-based payments ? Existence of data and systems to calculate the impact and satisfy ongoing
reporting requirements.
Furthermore, this is not the only significant change in accounting standards requiring consideration and application. New accounting standards for revenue and financial instruments will be effective a year earlier. These standards will also have wide reaching commercial implications, especially the revenue requirements, such that a lease implementation project should be part of a broader integrated financial reporting change program.
Although the effective date is three years away, we recommend that entities use this time to analyse the requirements, consider the wider implications of the changes and consequently make any required changes to their systems and processes.
Contacts
Alison White Partner Sydney
aliswhite@.au +61 (2) 9322 5304
Anna Crawford Partner Sydney
acrawford@.au +61 (2) 9322 7177
Clive Mottershead Partner Melbourne
cmottershead@.au +61 (3) 9671 7553
Donna Carrington Partner Perth
dcarrington@.au +61 (8) 9365 7047
Manuel Mani Partner Brisbane
mmani@.au +61 (0)7 3308 7095
Henri Venter Director Sydney
heventer@.au +61 (2) 9322 3891
Nicky de Villiers Manager Perth
ndevilliers@.au +61 (8) 9365 7389
Leases | A guide to IFRS 16
Contents
Executive summary
3
Dealing with transition
5
Detailed guide
9
Appendices
Appendix 1 Illustrative examples ? identification of a lease
97
Appendix 2 Presentation and disclosure checklist ? lessees
102
Appendix 3 Disclosure checklist ? lessors
107
Appendix 4 Comparison with US GAAP
109
2
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