IFRS 16: En ny standard implementeres

Janne Grønbek Jensen

Student thesis: Master thesis


During the past decades, leasing has been subject to increased attention. The companies have become more fond of using leasing as a way of financing acquisitions. Entering leasing contracts contrary to buying assets financed through bank loans, offers some advantages for the lessee. Obviously, they avoid having their funds tied to specific investments, and have a liquid working capital. Accounting for leasing contracts are presently regulated under the IAS 17. As leasing has become more and more used, the need for interpretations, such as the IFRIC 4 has increased over the years. Though the interpretations have clarified some of the issues identified, the standard has been criticized, for allowing the lessee too much of a choice in the accounting for leases and not being transparent for the users of the reporting. For almost a decade, the IASB have been working on a new leasing standard, the IFRS 16 leases, and in 2016 it was finally published. Under the IAS 17, leasing contracts were considered either finance or operational leases, determining whether to be accounted for in the lessee’s balance sheet or directly in the profit and loss. The aim with composing a new leasing standard was to create a more united and more transparent accounting and presentation of leases. In the IFRS 16, all leases have to be accounted for in the balance sheet, with the immediate effect that annual reports will be more transparent. Though creating a new standard, containing major changes in the accounting for contracts that usually reaches over years and affect series of annual reports, causes significant workloads in the affected companies. The board were aware, that the new standard potentially could cause major burdens on the companies during the implementation process. Taken this into account, the implementation date was set to 1 January 2019. As the effective date is rapidly getting closer, most affected companies have started their implementation process now, and all consultancies and auditors are becoming familiar with the new accounting model, even the public are beginning to show interest in the IFRS 16. The new standard is considered rather difficult to implement as well as demanding in the subsequent measurement of leases. This thesis takes the reader through the present regulation under IAS 17 and the new standard, IFRS 16, by means of description, practical examples, comparison of the present and the new standard and analysis of variations between the two. Those areas in IFRS 16 that differ the most from IAS 17, are given extra attention and have their own chapters, e.g. Lease term, Discount Rates, Separating Components and Modifications to existing contracts. Implementation of IFRS 16 is done under the special transitional regulation, and can be done fully retrospectively with adopting the standard as had it always been applicable. Alternatively, by a modified retrospective method, giving the lessee extensive reliefs in the accounting of existing contracts. The thesis present illustrations of the various implementation methods, and analyzes on the advantages and disadvantages for both lessee and users of the reporting, choosing one method over the other. Finally, the implementation methods are exemplified in a reformulated P&L and balance sheet and conclusions are presented. In general, the IASB, with the introduction of the IFRS 16, are considered to have achieved their goal of accounting for all leases in the balance sheet. However, the IFRS 16 includes numerous exceptions and practical expedients, which to some extent compromise the aim of a more transparent accounting treatment.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2018
Number of pages79