Lease Accounting [IFRS 16 & FASB ASC 842] – A Comprehensive Overview

lease accounting a comprehensive overview 2 | Lease Accounting [IFRS 16 & FASB ASC 842] - A Comprehensive Overview
By Ryan Hendrie | 8th August 2017 | 6 min read

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If you’re reading this, you’re at least aware of the upcoming changes to lease accounting standards and regulations.

After a decade of consultations, drafting and listening to feedback from big players in the accountancy and business sectors - the changes are finalised. The impact of the new standards, IFRS 16 and FASB ASC 842 is now beginning to take hold.

Companies have an unprecedented amount of work to complete in order to prepare for achieving compliance with the new lease accounting standards. Yet, before the work can even begin, most businesses need to understand what it is that they are facing.

If you’re responsible for a business that operates by leasing assets in any shape or form, then here are several useful articles, publications and lease accounting summaries/overviews to help quickly get you up to speed.

Start With: The First Steps To Lease Accounting Preparation

This article, titled The First Steps To Lease Accounting Preparation, gives a comprehensive overview of how to get ready for the changes to lease accounting practices.

The post begins by discussing the need for proper education to understand what’s actually changing and what the impact is.

The post then guides you through the next step in the process of preparing for IFRS 16 and FASB ASC 842 changes by outlining how to centralise all of your lease records and associated critical data.

After reading why this is so important, you will then be keen to fully grasp what exactly is happening with the two accounting boards standards regarding leases and leasing.


If You Operate Under IASB

IFRS 16 At A Glance is a completely free and totally helpful document that you can save for later, print for reference in your next group meeting or just browse on screen before taking a deep dive into some of the other resources listed in this post.

It gives a concise overview of what’s changing, explains the practical implications in terms you can understand, features guidance from leasing experts on how to prepare and make the most of the opportunity, and lays out the next steps you need to take now you’re educated on IFRS 16.

As said, it’s free and yours to keep here.

If You Operate Under FASB

FASB Leases (ASC 842) At A Glance is another free document that you need to read if your lease accounting complies with FASB accounting standards.

This document gives a concise overview of the changes involved in ASC 842 (note: they do differ from IFRS 16 somewhat), provides a useful insight in order to get a fuller understanding of the change in proper context, explains the practical implications that your business faces, and gives actionable solutions in order to prepare.

It’s another great download for any business that uses lease agreements and complies with FASB standards.


Get To Grips With The New Definition Of A Lease

Under the new lease accounting standards, the definition of a lease has been revised and now differs from the current definition under IAS 17 and IFRIC 4. The reason behind the change is to provide further clarity between the classification of a lease agreement and other agreements. In particular, how leases differentiate from service agreements.

This useful ePaper - Identifying a Lease: Navigating the new definition of a lease under IFRS 16 aims to provide a detailed overview of the new definition of a lease, its associated implications and provide practical advice on how businesses can navigate the challenges presented by the change. 


Getting Industry Specific

These overviews are all well and good and are great reading for any business heads, directors or accounts teams who are just beginning their compliance journey. However, you may wish to get some more specific understanding of how the changes affect your industry in particular.


Transportation & Logistics Industry

The lease accounting changes will impact the transportation and logistics sector massively. The majority of businesses will employ leasing as their means of securing assets in at least some degree. In fact, this sector is one of the driving reasons behind the lease accountancy change in the first place, so the pressure is on your industry in particular when it comes to achieving compliance.

Use this free download, How IFRS 16 Will Impact The Transportation & Logistics Industry, to learn how to take an early impact assessment and determine what effect the new legislation will have on your financial performance.


Telecommunications Industry

Another major sector to be impacted by lease accounting changes is telecommunications. This document is perfect for anybody operating within the telecommunications field and provides suitable examples specific to the industry.

As many telecoms entities lease a substantial number of big-ticket assets such as network towers and equipment, satellite transponders and fibre optic cables, this industry, in particular, is one that is likely to be significantly impacted by the new standards. But the volume of big-ticket items is not the only challenge facing this industry when it comes to IFRS 16. One area of contention for telecoms entities surrounds the ‘portion of assets’ assessment under the new standards. Which is explained in more detail within this ePublication.

See how IFRS 16 impacts telecommunications here.

Retail Industry

Retailers are expected to see a 98% increase in the amount of debt which is reported on balance sheet as a result of the upcoming lease accounting changes.

Make sure you know how this will impact your wider financial reports and performance, and also see how to turn this into an opportunity for success.

If your business works in retail, take note: Hans Hoogervorst, Chairman of the IASB, has noted that your sector will be one of the most significantly impacted areas under the new global accounting standards.

See how to best prepare for free, here, by reading Retail Industry: Highly Impacted by New Lease Accounting Standard IFRS 16.


Getting Ready For Compliance

There are a couple of other useful resources to check out. Having checked out all of the above, you should be ready to begin transitioning and implementing the new standards. This free-read should help.

The 7 Steps To New Lease Accounting Compliance gives you a helpful plan and lease accounting overview so that you can ensure your business is best placed for the change. This will help you steal a march on your competitors and make the most of the upcoming changes thanks to its simple and clear implementation guidance.


Go A Step Further

To simplify compliance with the new standards, you may also want to find out how lease accounting software will help at every stage of the implementation process by exploring Innervision’s lease accounting solution, LOIS. You can explore all of the system's unique lease accounting features here.

Alternatively, if all of this reading material has made you want to find out more, or maybe you still have a few questions, our team is more than willing to help.

We have an expert team of lease accounting professionals who are on hand to help your business not only comply with new lease accounting standards but make the most of them and turn the monumental change into an opportunity for success.

Get in touch with our team here: