Responding to COVID-19: insight, support and guidance
IFRS 16 removes the previous lease classifications of operating and finance leases for lessees and it requires that a right-of-use asset be recognised for all leases (there are exemptions for short-term and low value leases) with a corresponding lease liability representing the lessee's obligation to make lease payments for the asset.
For lessors the finance and operating lease classifications have been retained and the provisions in the standard for lessors are substantially unchanged, although there are some changes in relation to sale and lease back transactions and the accounting for the structure of sub-leases.
The ITC and Exposure Draft include CIPFA/LASAAC’s proposals for adoption of the new standard but the Board is seeking views on a number of issues including the approach to the subsequent measurement of the right-of-use asset, the approach to transition and concessionary leases (for lessees).
As it is aware that IFRS16 will have practical as well as technical considerations, CIPFA/LASAAC would appreciate feedback and information on the practical implications that implementation of the proposals has for local government bodies so that it can evaluate the impact of the standard on local authorities. Consequently the consultation and the response sheet provided include a ‘readiness assessment questionnaire’.