Implementation of New Accounting Standards

The new IFRS 16 – Leases introduces significant changes to the concept of the recognition and measurement of leases. The new standard requires lessees to recognise all leases on their balance sheets, including those which were previously treated as operating leases and recognised off-balance sheet as an expense of the current year.

Although IFRS 16 is effective for annual periods beginning on or after 1 January 2019, lenders and their corporate borrowers should start to assess potential impacts of the new standard implementation now, to avoid surprises. The implementation of the new standard may impact currently-held negotiations on future covenants, terms and conditions of loan and management remuneration.

It is expected that the new standard will have the biggest impact on businesses acting as lessees with a large portfolio of lease contracts, ie retailers.

Deloitte professionals are currently assisting and advising organisations on how to prepare for the first application of IFRS 16 including:

• Accounting advisory on complex lease contracts;
• Data collection and definition of required disclosures;
• Providing training and workshops on new IFRS 16 requirements for companies;
• Preparation of financial impact analysis; and 
• Consulting on the assessment of IT systems.