The new IFRS 16 leasing standard, which affects both lessees and lessors, entered into force on 1 January 2019.
Lessees are obliged to recognise almost all leases as ‘Right of Use’ assets and lease liabilities. However, this does not apply to leases with a low-value underlying asset, or to short-term leases of 12 months or less.
Lessees have the option of either a full retrospective restatement, reassessing the comparative data as if IFRS 16 had always been in force, or a limited restatement without reassessing the comparative data for the previous year.
Regulations regarding lessors remain essentially unchanged from IAS 17. Lessors continue to charge leases as operating leases or finance leases, depending on who bears the risks and rewards of ownership of the related asset.
The new standard also defines the expression ‘lease term’, which shall mean a contractual lease term including the option to extend the lease if it is probable that the lessee will exercise this option.
Currently, this new standard does not make any changes to local legislation; however its integration into the country’s legislation is probably only a matter of time.