IFRS 16 represents ‘the new lease standard’ and will affect accounting from the lessee perspective. Under the new standard, both operational and financial leases need to be recognized on the balance sheet which will reflect the value of the right of use asset and corresponding lease liability. IFRS 16 affects individual balance sheet accounts which have further impact on ratio's such as debt/equity ratio, asset turnover and solvency. Besides the impact to the balance sheet, the profit and loss will show an increase in EBITDA due to movement of operation lease expense to depreciation and interest.
Since leasing is a common practice, the new standard can have a big impact on your financial reporting systems. Want to be IFRS 16 compliant and see the impact of the new lease accounting rules? Schedule a demo today!