IFRS 16 Presentation and disclosure (APPENDIX)

Presentation and disclosure checklist – lessees

Potential consequences: lease versus buy

Reference	Presentation/disclosure requirement
	PRESENTATION
IFRS 16:47	Presentation – statement of financial position A lessee should either present in the statement of financial position, or disclose in the notes: right-of-use assets separately from other assets; and lease liabilities separately from other liabilities.
IFRS 16:47	If right-of-use assets are not presented separately in the statement of financial position, the lessee should: include right-of-use assets within the same line item as that within which the corresponding underlying assets would be presented if they were owned; and disclose which line items in the statement of financial position include those right-of-use assets.
IFRS 16:47	If lease liabilities are not presented separately in the statement of financial position, the lessee should disclose which line items in the statement of financial position include those liabilities.
IFRS 16:48	The requirement for separate presentation of right-of-use assets does not apply to right-of-use assets that meet the definition of investment property, which should be presented in the statement of financial position as investment property.
IFRS 16:49	Presentation – statement of profit or loss and other comprehensive income In the statement of profit or loss and other comprehensive income: the interest expense on the lease liability should be presented separately from the depreciation charge for the right-of-use asset; and the interest expense on the lease liability is a component of finance costs which, in accordance with paragraph 82(b) of IAS 1 Presentation of Financial Statements (, is required to be presented separately in the statement of profit or loss and other comprehensive income.
IFRS 16:50	Presentation – statement of cash flows In the statement of cash flows, a lessee should classify: cash payments for the principal portion of the lease liability within cash flows from financing activities; cash payments for the interest portion of the lease liability applying the requirements in IAS 7 Statement of Cash Flows for interest paid; and short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement of the lease liability within cash flows from operating activities.

Reference	Presentation/disclosure requirement
	DISCLOSURE
IFRS 16:51 IFRS 16:52	Notes: The objective of IFRS 16’s disclosure requirements for lessees is that sufficient information is disclosed in the notes, taken together with the information provided in the statement of financial position, statement of profit or loss and statement of cash flows, to provide a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessee. IFRS 16:52 to 60 (see below) specify requirements designed to meet this objective. A lessee should disclose information about its leases for which it is a lessee in a single note or separate section in its financial statements. However, a lessee need not duplicate information that is already presented elsewhere in the financial statements, provided that the information is incorporated by cross-reference in the single note or separate section about leases.
IFRS 16:53	Disclosure of amounts reflected in financial statements The following amounts are required to be disclosed for the reporting period: depreciation charge for right-of-use assets by class of underlying asset; interest expense on lease liabilities; the expense relating to short-term leases accounted for under IFRS 16:6 (see 7.2). This expense need not include the expense relating to leases with a lease term of one month or less; the expense relating to leases of low-value assets accounted for applying IFRS 16:6 (see 7.2). This expense should not include the expense relating to short-term leases of low-value assets reported under (c) above; the expense relating to variable lease payments not included in the measurement of lease liabilities (see 7.5.2.3); f) income from subleasing right-of-use assets; total cash outflow for leases; additions to right-of-use assets; gains or losses arising from sale and leaseback transactions; and the carrying amount of right-of-use assets at the end of the reporting period by class of underlying asset.
IFRS 16:54	Notes: The disclosures specified in IFRS 16:53 should be reported in a tabular format, unless another format is more appropriate. The amounts disclosed under IFRS 16:53 should include costs that a lessee has included in the carrying amount of another asset during the reporting period.
IFRS 16:55	Disclosure of lease commitments for short-term leases Disclosure is required of the amount of a lessee’s lease commitments for short-term leases accounted for applying IFRS 16:6 (see 7.2) if the portfolio of short-term leases to which the lessee is committed at the end of the reporting period is dissimilar to the portfolio of short-term leases to which the short-term lease expense disclosed under IFRS 16:53(c) (see above) relates.

Reference	Presentation/disclosure requirement
	Note: This disclosure requirement may be triggered in the year in which IFRS 16 is applied if an entity applies the practical expedient allowed for lease terms expected to end within 12 months of the date of initial application (see 11.6.3.2).
IFRS 16:56	Right-of-use assets meeting the definition of investment property If right-of-use assets meet the definition of investment property, the disclosure requirements of IAS 40 Investment Property should be applied. In that case, a lessee is not required to provide the disclosures in IFRS 16:53(a), (f), (h) or (j) (see above) for those right-of-use assets.
IFRS 16:57	Right-of-use assets measured at revalued amounts under IAS 16 If a lessee measures right-of-use assets at revalued amounts applying IAS 16 Property, Plant and Equipment, it should disclose the information required by IAS 16:77 for those right-of-use assets.
[IFRS 16:58]	Maturity analysis for lease liabilities Lessees are required to present a maturity analysis of lease liabilities applying paragraphs 39 and B11 of IFRS 7 Financial Instruments: Disclosures. This analysis should be presented separately from the maturity analyses of other financial liabilities.
IFRS 16:59	Additional information regarding the scope of lease activities General requirement to disclose additional information In addition to the disclosures required under IFRS 16:53 to 58 (see above), a lessee is required to disclose additional qualitative and quantitative information about its leasing activities necessary to meet the disclosure objective in IFRS 16:51 (see above). This additional information may include, but is not limited to, information that helps users of financial statements to assess: the nature of the lessee’s leasing activities; future cash outflows to which the lessee is potentially exposed that are not reflected in the measurement of lease liabilities. This includes exposure arising from: variable lease payments (see below for further details); extension options and termination options (see below for further details); residual value guarantees (see below for further details); and leases not yet commenced to which the lessee is committed; restrictions or covenants imposed by leases; and sale and leaseback transactions (see below for further details).

Reference	Presentation/disclosure requirement
IFRS 16:B48	In determining whether additional information about leasing activities is necessary to meet the disclosure objective in IFRS 16:51 (see above), a lessee should consider: whether that information is relevant to users of financial statements. A lessee should provide additional information as specified in IFRS 16:59 (see above) only if that information is expected to be relevant to users of financial statements. In this context, this is likely to be the case if it helps those users to understand: the flexibility provided by leases (e.g. if a lessee can reduce its exposure by exercising termination options or renewing leases with favourable terms and conditions); restrictions imposed by leases (e.g. if the entity is required to maintain particular financial ratios); sensitivity of reported information to key variables (e.g. to future variable lease payments); exposure to other risks arising from leases; and deviations from industry practice (e.g. unusual or unique lease terms and conditions that affect a lessee’s lease portfolio); and whether that information is apparent from information either presented in the primary financial statements or disclosed in the notes. A lessee need not duplicate information that is already presented elsewhere in the financial statements.
IFRS 16:BC225	Note: IFRS 16 therefore requires a lessee to disclose any material entity-specific information that is necessary in order to meet the disclosure objective and is not covered elsewhere in the financial statements. IFRS 16 supplements this requirement with a list of user information needs that additional disclosures should address, and with illustrative examples of disclosures (see illustrative examples 22 and 23 accompanying IFRS 16) that a lessee might provide in complying with the additional disclosure requirements. These examples are not exhaustive. Nonetheless, the IASB thinks that the illustrative examples are useful in demonstrating that judgement should be applied in determining the most useful and relevant disclosures, which will depend on a lessee’s individual circumstances. In the IASB’s view, this approach facilitates the provision of more relevant and useful disclosures by: discouraging the use of generic or ‘boilerplate’ statements; and enabling a lessee to apply judgement to identify the information that is relevant to users of financial statements and focus its efforts on providing that information.
IFRS 16:B49	Additional information relating to variable lease payments (see illustrative example 22 accompanying IFRS 16) Additional information relating to variable lease payments that, depending on the circumstances, may be needed to satisfy the disclosure objective in IFRS 16:51 (see above) could include information that helps users of financial statements to assess, for example: the lessee’s reasons for using variable lease payments and the prevalence of those payments; the relative magnitude of variable lease payments to fixed payments; key variables upon which variable lease payments depend and how payments are expected to vary in response to changes in those key variables; and other operational and financial effects of variable lease payments.

Reference	Presentation/disclosure requirement
IFRS 16:B50	Additional information relating to extension options or termination options (see illustrative example 23 accompanying IFRS 16) Additional information relating to extension options or termination options that, depending on the circumstances, may be needed to satisfy the disclosure objective in IFRS 16:51 (see above) could include information that helps users of financial statements to assess, for example: the lessee’s reasons for using extension options or termination options and the prevalence of those options; the relative magnitude of optional lease payments to lease payments; the prevalence of the exercise of options that were not included in the measurement of lease liabilities; and other operational and financial effects of those options.
IFRS 16:B51	Additional information relating to residual value guarantees Additional information relating to residual value guarantees that, depending on the circumstances, may be needed to satisfy the disclosure objective in IFRS 16:51 (see above) could include information that helps users of financial statements to assess, for example: the lessee’s reasons for providing residual value guarantees and the prevalence of those guarantees; the magnitude of a lessee’s exposure to residual value risk; the nature of underlying assets for which those guarantees are provided; and other operational and financial effects of those guarantees.
IFRS 16:B52	Additional information relating to sale and leaseback transactions Additional information relating to sale and leaseback transactions that, depending on the circumstances, may be needed to satisfy the disclosure objective in IFRS 16:51 (see above) could include information that helps users of financial statements to assess, for example: the lessee’s reasons for sale and leaseback transactions and the prevalence of those transactions; key terms and conditions of individual sale and leaseback transactions; payments not included in the measurement of lease liabilities; and the cash flow effect of sale and leaseback transactions in the reporting period.
IFRS 16:60	Short-term leases or leases of low-value assets A lessee that accounts for short-term leases or leases of low-value assets in accordance with IFRS 16:6 (see 7.2) is required to disclose that fact.

Appendix 3

Disclosure checklist – lessors

Reference	Disclosure requirement
IFRS 16:89 IFRS 16:BC251	Notes: The objective of the disclosure requirements for lessors is for lessors to disclose information in the notes that, together with the information provided in the statement of financial position, statement of profit or loss and statement of cash flows, gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessor. IFRS 16:90 to 97 (see below) specify requirements designed to meet this objective. The lessor disclosure requirements in IFRS 16 are more extensive than those in IAS 17 to enable users of financial statements to better evaluate the amount, timing and uncertainty of cash flows arising from a lessor’s leasing activities. The disclosure requirements have been expanded to address the perception that the lessor accounting model in IAS 17 did not provide sufficient information relating to all elements of a lessor’s leasing activities.
IFRS 16:90(a)	Disclosures – finance leases The following amounts should be disclosed for the reporting period for finance leases: selling profit or loss; finance income on the net investment in the lease; and income relating to variable lease payments not included in the measurement of the net investment in the lease.
IFRS 16:91	Note: These disclosures should be presented in a tabular format, unless another format is more appropriate.
IFRS 16:93 & 94	A lessor should also: provide a qualitative and quantitative explanation of the significant changes in the carrying amount of the net investment in finance leases; disclose a maturity analysis of the lease payments receivable, showing the undiscounted lease payments to be received on an annual basis for a minimum of each of the first five years and a total of the amounts for the remaining years; and reconcile the undiscounted lease payments to the net investment in the lease. This reconciliation should identify the unearned finance income relating to the lease payments receivable and any discounted unguaranteed residual value.
	Note: Finance lease assets fall within the definition of financial instruments as set out in IAS 32 Financial Instruments: Presentation. Therefore, in addition to the specific disclosure requirements set out above, an entity must also meet the requirements of IFRS 7 Financial Instruments: Disclosures in respect of its finance lease arrangements. In particular, because the derecognition and impairment requirements of IFRS 9 Financial Instruments (or, for entities that have not yet adopted IFRS 9, IAS 39 Financial Instruments: Recognition and Measurement) apply to a lessor’s net investment in a lease, the relevant requirements under IFRS 7 are also applicable. These are the disclosure requirements for transfers of financial assets in accordance with IFRS 7:42A and the disclosure requirements regarding credit risk under IFRS 7.35A et seq.

Reference	Disclosure requirement
IFRS 16:90(b)]	Disclosures – operating leases For operating leases, a lessor should disclose its lease income for the reporting period, separately disclosing income relating to variable lease payments that do not depend on an index or a rate.
IFRS 16:91	Note: These disclosures should be presented in a tabular format, unless another format is more appropriate.
IFRS 16:95	For items of property, plant and equipment subject to an operating lease, a lessor should apply the disclosure requirements of IAS 16 Property, Plant and Equipment. For this purpose, each class of property, plant and equipment should be segregated into assets subject to operating leases and assets not subject to operating leases (i.e. the disclosures required by IAS 16 should be provided separately for assets subject to an operating lease (by class of underlying asset) and owned assets held and used by the lessor.
IFRS 16:96	The disclosure requirements in IAS 36 Impairment of Assets, IAS 38 Intangible Assets, IAS 40 Investment Property and IAS 41 Agriculture should be applied for assets subject to operating leases.
IFRS 16:97	A lessor should disclose a maturity analysis of lease payments, showing the undiscounted lease payments to be received on an annual basis for a minimum of each of the first five years and a total of the amounts for the remaining years.
IFRS 16:92	Additional qualitative and quantitative information A lessor should disclose additional qualitative and quantitative information about its leasing activities necessary to meet the disclosure objective in IFRS 16:89 (see above). This additional information includes, but is not limited to, information that helps users of financial statements to assess: the nature of the lessor’s leasing activities; and how the lessor manages the risk associated with any rights it retains in underlying assets. In particular, a lessor should disclose its risk management strategy for the rights it retains in underlying assets, including any means by which the lessor reduces that risk. Such means may include, for example, buy-back agreements, residual value guarantees or variable lease payments for use in excess of specified limits.

Appendix 4

Comparison with US GAAP

The FASB issued its new leasing standard, ASU 2016-02, in February 2016. Although the IASB and the FASB started the initiative to improve the accounting for leases as a joint project, with the aim of producing a fully converged standard, in the end there are a number of differences in approach between IFRS 16 and ASU 2016-02, the most significant of which are highlighted in the table below.

Key provision	IFRS 16	ASU 2016-02
Scope	Scope includes leases of all assets (with specified exceptions – see section 2). Also, lessees can elect to apply the guidance to leases of intangible assets.	Scope includes leases of all property, plant, and equipment and excludes: leases of intangible assets; leases to explore for or use non-regenerative resources; leases of biological assets; leases of inventory; and leases of assets under construction.
Leases of low- value assets	A lessee may recognise the payments on leases of low- value assets on a straight-line basis over the lease term (in a manner similar to recognition of an operating lease under IAS 17) – see 7.2). When the exemption is applied, such leases are not reflected on the lessee’s balance sheet.	No equivalent exemption under US GAAP. However, the FASB believes that an entity will be able to adopt a reasonable capitalisation policy under which the entity will not recognise lease assets and liabilities that are below a certain threshold.
Lessee accounting model	All leases are ‘on-balance sheet’ (subject to exemptions for short-term leases and leases of low-value assets – see 7.2). No distinction between finance and operating leases. As of the lease commencement date, a lessee recognises: a liability for its lease obligation (initially measured at the present value of the future lease payments not yet paid over the lease term) (see 7.4.2); and an asset for its right to use the underlying asset (equal to the lease liability, adjusted for lease payments made at or before lease commencement, lease incentives, and any initial direct costs) (see 7.4.1). The lessee uses the effective interest rate method to subsequently account for the lease liability (see 7.5.2), and the right-of-use asset is generally amortised on a straight-line basis (see 7.5.1).	All leases are ‘on-balance sheet’ (subject to exemption for short-term leases). Distinction between finance (capital) and operating leases is retained. The accounting for finance leases is similar to the IFRS 16 approach. The right-of-use asset is generally amortised on a straight-line basis. This amortisation, when combined with the interest on the lease liability, results in a front-loaded expense profile in which interest and amortisation are presented separately in the income statement. For operating leases: the lease liability is measured as under IFRS 16 but without a requirement to reassess variable lease payments; and the lease expense is generally recognised on a straight- line basis and is presented as a single line item in the income statement.

Key provision	IFRS 16	ASU 2016-02
Lessor accounting	Retains the current lessor accounting approach for operating and finance leases (see sections 8 and 9). A dealer’s profit for a finance lease is recognised up-front without regard to the revenue guidance in IFRS 15 (see 9.1.2).	Retains the current lessor accounting approach for operating and capital (direct financing and sales-type) leases. However, the lease classification criteria will change, and the treatment of dealer’s profit, if any, will be affected as follows: a dealer’s profit is recognised up-front if the arrangement is a sales-type lease; and a dealer’s profit resulting from a direct financing lease, if any, is deferred and recognised as interest income over the lease term. Leveraged lease accounting is eliminated going forward (existing leveraged leases are grandfathered).
Subleases	The intermediate lessor is required to classify a sublease as either an operating lease or a finance lease by reference to the right-of-use asset arising from the head lease (see 8.6).	The intermediate lessor is required to classify a sublease by reference to the underlying asset of the head lease.
Sale-and- leaseback arrangements	For transactions that qualify as a sale, the gain or loss recognised by a seller-lessee is limited to the amount of any gain or loss that relates to the rights transferred to the buyer-lessor (see section 10).	If the transaction qualifies as a sale, the entire gain on the transaction is recognised.