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IFRS16: European Commission endorsement

IFRS16: European Commission endorsement

Thursday, December 28, 2017

IFRS16 “Leases” was endorsed by the European Commission on 9th November 2017.


Companies impacted by IFRS standards will have to apply IFRS16 “Leases” as of 1st January 2019 (mandatory application) and can opt to apply it from 1st January 2018 if they are also impacted by another standard called IFRS15 “revenue recognition”.


Nevertheless, not all companies are impacted.


Generally speaking, only listed companies or those not listed but having chosen IFRS (International Financial Reporting Standards) for their consolidated accounts (including their subsidiaries) will be affected by this new standard. Also, and exceptionally, certain countries have opted for the application of the IFRS reference for their local accounting. For these countries, all companies are not systematically obliged to apply IFRS Standard either.


In the lessee’s balance sheet, the lessee will have to recognize a Lease Liability and a Right of Use asset. In its profit and loss account, instead of lease payments under the previous standard (IAS17), the lessee will have to book a depreciation charge, usually straight-line, of the Right of Use asset and a lease liability interest charge, which reduces over time.

 


To assist its customers with this change, ARVAL has developed straightforward reports which will be available in January 2018.