Scribd
Upload
72 views4 pages

Q-2. IFRS 16 Compared To IAS-17

International Financial Reporting Standard (IFRS) 16 was issued in 2016 to replace IAS 17 and changes how leases are classified and accounted for. Under IFRS 16, all leases are recognized on the balance sheet as a right-of-use asset and lease liability. IFRS 16 eliminates the operating lease classification and requires lessees to recognize depreciation on right-of-use assets and interest on lease liabilities in the income statement. Lessor accounting remains similar to previous guidance under IAS 17. IFRS 16 includes extensive new disclosure requirements for both lessees and lessors.

Uploaded by

shohag mahmud
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
72 views4 pages

Q-2. IFRS 16 Compared To IAS-17

International Financial Reporting Standard (IFRS) 16 was issued in 2016 to replace IAS 17 and changes how leases are classified and accounted for. Under IFRS 16, all leases are recognized on the balance sheet as a right-of-use asset and lease liability. IFRS 16 eliminates the operating lease classification and requires lessees to recognize depreciation on right-of-use assets and interest on lease liabilities in the income statement. Lessor accounting remains similar to previous guidance under IAS 17. IFRS 16 includes extensive new disclosure requirements for both lessees and lessors.

Uploaded by

shohag mahmud
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Changes in IFRS 16 compared to IAS-17

International accounting Standard 17 (IAS-17) was for lease. The IASB issued IFRS 16 to replace
IAS 17 in 2016.
The main points where there is a change in between IAS-17 and IFRS-16 are given below.
1. There was two types of lease in IAS 17. the first one was operating lease and the second
one was finance lease. They were classified based on risk bearing. But in IFRS 16 lease is
classified only by the party who was the using right of that particular asset.
2. In IAS-16 any other service cost associated with the lease was included in the lease but
in IFRS-17 they should be treated separately. And it makes the calculation more complex
than ever before.
3. In IAS-17 there were two types of lease .there finance lease was considered as asset and
operating lease was considered as expense. But the main change in IFRS-16 is that all
lease will be considered as finance lease that means all lease will be considered as asset.
4. Any amount charged as depreciation and any expense charged as interest shall be
included in the statement of profit and loss.
5. Any payment paid for lease shall be a lease liability.
6. Companies can make a portfolio and show their lease in together if there is ni special
situation or financial condition.
7. There is a major change in the accounting treatment of lease in lessee’s book .but there
is not any significant change in the book of the lessor.
8. Any item that is leased for
a. having a duration of less than one year
b. the amount is less than 5000 dollar
shall not be considered as asset nor liability
The impact of IFRS -16 On Financial Statements and how to report them
IFRS –16 has direct impact on assets .in the balance sheet of lessee asset will be the right to use
asset and liability will be lease payment obligation.
Any depreciation or interest charge will have to be shown in straight line basis. Companies can
make a portfolio and show their lease in together if there is any special situation or financial
condition.
The companies which have significantly influenced by the IFRS-16 have to make financial
statements 3 stages
1.all of their assets needs to be identified due to new rules.
2. lease time, what will happen after the lease period, interest expense shall be determined
3.after doing the first two step the assets and liabilities shall be calculated.
The impact of IFRS 16 on financial statements can be illustrated by an example

There is a contract between a lessor and lessee for 10 year


Per year lease payment 25000
Other direct cost 15000
Interest rate 7%
As per IFRS 16 the calculation would be like this
Present value of payment: 175590
Total carrying amount :((175590+30000)=205590
Per year depreciation charge :20559

Year Lease payment Interest Lease liability Lease liability


reduction
0 0 0 0 175590
1 25000 12291.3 12708.7 162881.3

2 25000 11401.691 13598.309 149282.991

Impact on statement of financial positions


Non-current assets: amount
Right of use assets (205590-20559) 185031
Current liability
Lease liability (12708.7+12291.3) 25000
Non-current liability
Lease liability 149282.991

Impact on income statement


Expense amount
Interest expense 12291.3
Depreciation expense 20559
Disclosures of IFRS-16
DISCLOSURE FOR LESSEE
1.The main purposes of the disclosure in the notes section is that the user of the financial information
can have a clear and concise knowledge about the financial position and financial performance of the
company. they can have this knowledge seeing the statement of profit and loss, balance sheet, and cash
flow.

2.lessee have to disclose information about lease in notes section of financial statements. If the
information is presented anywhere in the financial statement, then there is no need to present them
again.

3.lessee have to state the things below in the disclosure


a. lessee shall disclose the amount of depreciation charged for each class of assets.
b. any interest charge on the liability created by lease.
c. any expense related to lease shall be disclosed. if the lease is for one month or less the expense need
not to be disclosed.

d. expense of low value asset and short term lease shall not be included.
e. any cost or variable lease expense shall not be included.
f. a lessee shall disclose any income arising from sublease.
g. a lessee shall disclose the amount of total cash outflow due to lease.
h. if there is any addition in the right to use asset, then that should be disclosed
i. lessee shall disclose any gain or loss arising from sale of leased assets or leaseback.
j. lessee shall disclose the present value of asset at the end of each lease year. And the assets should be
shown categorically.

4.in paragraph 53, there is a specified format to disclosure. If there is any format available to the lessee
then he can use it.

5.lessee have to disclose any short term lease according to the instructions given in the paragraph 6.

6.the disclosures that are required for IAS 40 shall be used in case of right to use any asset the fulfills the
requirements to be an investment property.

7.if the amount of right to use assets are revalued then it should be disclosed as per requirements of
IAS-16
For lessor
1.The main purposes of the disclosure in the notes section is that the user of the financial information
can have a clear and concise knowledge about the financial position and financial performance of the
company. they can have this knowledge seeing the statement of profit and loss, balance sheet, and cash
flow.

2.a lessor have to disclose any amount of money

A. For finance lease


I. Revenue from selling leased asset
II. Any income arising as finance income
III. Any variable income that is not included as investment income
3. from operating lease the lessor shall disclose the amount as per the requirement of para 90

4. to meet the disclosure requirement of para 89 a lessor shall disclose any information related
to lease. The information can be both qualitative and quantitative.
I. The nature of the lease
II. If any risk is associated with the lease

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy