IFRS 16 — Leases
Single lessee model- Issued by
- International Accounting Standards Board (IASB)
- Jurisdiction
- IFRS (international)
- Effective
- Annual reporting periods beginning on or after 1 January 2019.
IFRS 16 is the international leasing standard. Unlike US GAAP it uses a single lessee accounting model: almost every lease is recognised as a right-of-use asset and a lease liability, and accounted for like a finance lease — depreciation of the asset plus interest on the liability. There is no operating/finance distinction for lessees.
Read the standard at its source: International Accounting Standards Board (IASB).
Measurement, classification & disclosure
Single lessee model
A lessee recognises a right-of-use asset and a lease liability for all leases, with two optional exemptions: short-term leases (12 months or less) and leases of low-value assets. There is no operating-lease classification for lessees.
Cite: IFRS 16.22 and IFRS 16.5
Initial measurement
The lease liability is the present value of the lease payments discounted at the interest rate implicit in the lease, or the lessee's incremental borrowing rate if that is not readily determinable. The ROU asset includes that liability, payments made at or before commencement, initial direct costs and estimated restoration costs, less incentives received.
Cite: IFRS 16.26 and IFRS 16.24
Subsequent measurement
The ROU asset is depreciated (usually straight-line over the shorter of the lease term and the asset's useful life) and the lease liability accretes interest, which is recognised in profit or loss. Total expense is front-loaded.
Cite: IFRS 16.30–38
Apply IFRS 16 to a real lease
Enter a lease in the free calculator with IFRS 16 selected. Ledgerage applies the correct lessee model and returns the schedule, journal entries and disclosures — with a citation on every result.
IFRS 16 questions, answered
How is IFRS 16 different from ASC 842?
The biggest difference is that IFRS 16 has a single lessee model — every lease is treated like a finance lease with front-loaded expense — whereas ASC 842 keeps operating leases with straight-line expense. Initial measurement of the liability is almost identical.
The other standards
ASC 842 is the US GAAP leasing standard. It requires a lessee to recognise a right-of-use (ROU) asset and a lease liability on the…
Read the guide →GASB 87 is the leasing standard for US state and local governments. Like IFRS 16 it uses a single model: a lessee recognises a lea…
Read the guide →