Although the new standard was published in 2016, its implementation is difficult for many entities. The application of new guidelines is a challenge for the entire organization, as it requires appropriate changes both in the processes related to accounting and in operational departments.
The new model requires the lessee to recognise almost all lease contracts on the balance sheet. For lessees that have entered into contracts classified as operating leases under IAS17, this could have a significant impact on the financial statements.
This case study publication aims to concentrate on the disclosure aspect of the new standard for the lessee. In this case study we describe how to apply IFRS 16, i.e. disclosure required in financial statement in the year of the first adoption of IFRS 16 and the disclosures that need to be provided on an ongoing basis.
We have deliberately selected a Company with relatively simple operations. The extract from the directors’ report is followed by IAS17 disclosures. In the final part of this section, we have summarised the impact of IFRS16.
Incidental subleases are also presented to indicate that the new lease model for lessee may impact also accounting for subleases, nevertheless this publication is not designed for lessors.
Tomasz Konieczny, Partner PwC