IFRS 16 – Leases 

Overview

The International Accounting Standards Board (IASB) and the US Federal Accounting Standards Board (FASB) have worked together to improve transparency in financial reporting for leases, and in January 2016 the IASB published the new accounting standard, IFRS 16: Leases.

Investors, financial analysts and regulators have been calling for better information about leases in financial statements. Assets obtained under some lease agreements are currently not recognised in the balance sheet, but other leased assets are. This impairs comparability between the financial statements of different entities – particularly between those that purchase assets and those that lease them under “off-balance sheet” arrangements.

The impact in Switzerland

IFRS 16 will have an impact on the balance sheets and income statements of many businesses. The airline, retail and travel and leisure industries in particular are expected to be affected significantly by the new standard. IFRS 16 requires the inclusion of almost all leases on the lessee’s balance sheet, with only two major exceptions:

• Short-term leases
  Short-term leases are leases with a term of 12 months or less. The determination of lease term is affected by options to extend or to terminate the lease, with the result that many property leases will now have to appear on the lessee’s balance sheet – regardless of the length of the non-cancellable lease term, which in Switzerland is typically between three and six months. 
• Leases of low-value assets
  Low-value assets are those that have a low absolute value when they are new, such as laptops, phones and office furniture. Explicitly, cars are not considered ‘low-value’ assets.

These may be – but are not required to be – recognised as an asset.