Chartered Accountants Ireland has responded to the International Accounting Standards Board’s (IASB’s) request for information on the post-implementation review of IFRS 16- Leases.
IFRS 16 came into effect in January 2019 and the IASB, in line with their due process procedures, are conducting a review of the standard to assess whether it is broadly working as intended for investors, companies, auditors and regulators.
In its response to this request for information, the Institute’s Financial Reporting Technical Committee noted that IFRS 16 was “operating well for the vast majority of leases and that it has led to an improvement in financial reporting”. The Committee also highlighted some areas where the requirements of IFRS 16 remain unclear and where clarifications and additional guidance would be beneficial. Some of these areas include.
- Clarification in relation to some sale and leaseback scenarios, including sales in a corporate wrapper.
- Clarification regarding lessor accounting, including some scenarios where inappropriate accounting outcomes might arise.
- The impact that inflation may have on discount rates used, which is of particular relevance in today’s environment.
- Interaction between IFRS 9 and IFRS 16.
- Clarification regarding “in-substance fixed payments”, including the need for guidance regarding assets that generate nature-dependent electricity.
- The treatment of non-monetary consideration for leases (such as rental payments being based on potential produce from leased land).
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