IFRS 16
IFRS 16 Leases is the international accounting standard for leases. The IASB issued it in January 2016, and it became effective for annual periods beginning on or after January 1, 2019.
Leasing
Explanation
IFRS 16 uses a single lessee model: lessees recognize a right-of-use asset and a lease liability for almost all leases and report depreciation and interest expense separately. Exemptions apply to short-term leases and leases of low-value assets.
For lessors, IFRS 16 keeps two categories: finance leases and operating leases. Classification depends on whether substantially all risks and rewards of ownership are transferred, assessed through indicators and overall judgment.
Compared with ASC 842, the main differences are the single lessee model, the low-value exemption, lessor classification categories, and certain practical expedients.
Why It Matters
Groups with US GAAP and IFRS reporting often need to classify and measure the same lease twice. In July 2026, the IASB concluded its post-implementation review and found that IFRS 16 is, overall, working as intended. In SAP, parallel accounting principles allow both frameworks to be processed for one contract.
Related Terms
ASC 842 · Finance Lease · Operating Lease · Right-of-Use Asset · IFRS 15 · Lease Term · Lease Modification
Related Solution:
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