The New AASB 16 Lease Accounting Standard

The ASX 100 Lease Accounting Impact Study identifies which companies will be most impacted by the new AASB 16 lease accounting standard that Australian companies will begin to adopt in 2019 . One of the biggest accounting changes in history, these new standards will result in listed companies around the world transferring almost US$3 trillion worth of liabilities onto corporate balance sheets over the coming years.

Historically, only finance leases– leases that have a similar structure to asset purchases – have been reported as assets and liabilities on corporate balance sheets. Other leases, called operating leases, were “off-balance sheet” and were accounted for using principles similar to service contracts.  Download the ASX 100 Lease Accounting Impact Study to learn which companies have the highest operating lease liabilities.

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Assets Companies Lease

The assets companies lease vary based upon their business model, but the most common are:

  • Land, Buildings, and Real Estate Assets
  • Laptops, Servers, Storage, and IT Assets
  • Trucks, Company Cars, and Other Vehicles
  • Forklifts and Material Handling Equipment
  • Barges, Rail Cars, and Transport Equipment
  • Excavation, Exploration, and Mining Equipment

Implementing AASB 16

To perform proper accounting under the new AASB 16 standard, ASX 100 companies will have to:

  • Inventory their Lease Portfolio
  • Abstract Key Data from Leases
  • Upgrade Existing or Select New Systems
  • Modifies Financial Policies and Controls
  • Train Employees on Process Changes
  • New Quantitative and Qualitative Disclosures

Read Coverage of the Report in the Australian Financial Review

The article covers what the report suggests about the impact of AASB 16 on balance sheets, financial ratios, and more.