IFRS 16: The Effect of IFRS 16 on Danish Companies

Adel Hussain & Egzon Mustafi

Student thesis: Master thesis


This master thesis has been conducted in connection with the completion of the MSc in Business Economics and Auditing at Copenhagen Business School. The purpose of the thesis is to at the impacts and the challenges companies will face when implementing the new leasing standard, IFRS 16. On January 1st 2019, the new leasing standard IFRS 16 was implemented. The leasing standard has been under development by IASB and FASB for more than a decade. IFRS 16 replaces the former leasing standard IAS 17. IFRS 16 is now implemented without classification. All leasing contracts must be included in the balance. It is expected that IFRS 16 will result in a more accurate and trustworthy overview of the companies’ balance, profit and loss account and key ratios. Besides this, improvement in the comparability is expected. This master thesis will at first present the description of the former leasing standard IAS 17 and its procedure of leasing contracts. Subsequently, the areas of criticism in the IAS 17 will be touched. In relation to the above, the procedure of the new leasing standard IFRS 16 and the underlying accounting process of the contracts will be described. Followed by the descriptions, IFRS 16 and IAS 17 will be set against each other in a comparative analysis, where differences and similarities will be outlined. Finally, an analysis of DSV A/S and ISS A/S will be conducted, where the following leasing contracts will be included by IFRS 16 regulations. The analysis regards how DSV’s and ISS’ accounts and key ratios will be affected, when changing from including the leasing agreements by the IAS 17 to IFRS 16. Moreover, the analysis will describe DSV’s own expectations of how they expect IFRS 16 to affect their accounts and key ratios. It can be concluded for both cases that IFRS 16 affects both companies´ accounts and key ratios. The total of the balance sheet increases significantly and the key ratios changes. At last, the discussion regarding whether or not the IFRS 16 uncovers the criticism of IAS 17 will follow. Here, a discussion of the criticism of IFRS 16 and possible challenges that companies will encounter when implementing IFRS 16 will take place. In conclusion, IFRS 16 has rectified the criticism IAS 17 faced. Companies with many operational lease contracts will have a greater impact on their accounts and key ratios. Despite the challenges of IFRS 16, it is possible to conclude that this standard gives a more trustworthy representation of a firm’s financial position. The new standard achieves greater transparency concerning the firms’ economic gearing and use of capital.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2019
Number of pages146