Explain IFRS 16

Question

Explain IFRS 16

Accepted Answer

IFRS 16 is an accounting standard that requires lessees to recognize assets and liabilities for all leases on their balance sheets.

IFRS 16 eliminates the distinction between operating and finance leases for lessees.
Lessees are required to recognize a right-of-use asset representing their right to use the leased asset and a lease liability representing their obligation to make lease payments.
The standard also requires lessees to depreciate the right-of-use asset and recognize interest expense on the lease liability.
IFRS 16 aims to provide a more transparent view of a company's financial position by bringing all leases onto the balance sheet.
Example: A company leasing office space will now have to recognize the leased office space as an asset and the lease payments as a liability on their balance sheet.

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