Information for accountants

Accounting for leases

When preparing signed financial statements (refer to definition of signed financial statement in MFR Regulation, page 56), please be aware of the impact of AASB 16 (IFRS 16) – Leases.

The new leases standard requires companies that lease equipment to account for virtually all leases on-balance sheet. Property and equipment leases previously recognised as operating leases (effectively off balance sheet) will be accounted for as a right-of-use (ROU) asset and lease liability which will bring more transparency about a company’s lease commitments.

Exemptions still exist for short term (less than 12 months) and low value (< $ 5,000) leases. This may significantly impact a licensee’s financial metrics including current ratio and net tangible assets (NTA). Lessor accounting will be largely unchanged from the current leases standard, AASB 117 (IAS 17).