Lessees, who at present mostly hold operating leases, will be required to disclose the right of use for the leased assets, such as property, vehicles and IT equipment, on their balance sheets in future. The new requirements call for right-of-use assets and liabilities to be recognised on the balance sheet from 1 January 2019 for practically all leases as well as for many current rental contracts. This leads to an extension of the balance sheet with consequences for the change in the lessee's equity ratio and debt-equity ratio. At the same time, previous rental payments will be replaced by interest and depreciation expenses, leading to a decrease in the EBITDA (earnings before interest, taxes, depreciation and amortisation) which is used as a ratio for measuring operating performance before capital expenditure (operating profit). At the inception of a lease, the depreciation for a right-of-use asset and the addition of accrued interest for a lease liability will exceed the previous rental expense and lease payments (‘front loading effect’) for lessees.
In comparison to IAS 17, accounting by lessors remains unchanged.
The blueprint ‘IFRS 16 - lessees’ comprises various elements:
- Financial Accounting
- Result Layer
Functional processing is based on the following process chain: