Approach with caution: lease definition changes in the near future

The new accounting rules encompass new rules on lease definition. Effectively a lease is now tighly defined and in some cases items that weren't leases will now be a lease and hence on balance sheet. Likewise items that were operating or finance leases could now not be a lease at all.

The key criteria are as follows:

• Identified asset
• Lessee obtains economic benefit
• Lessee directs use

The below graphic shows the basic changes between the old and new standard and how the accounts are affected.

With these criteria there is the opportunity for current leases not to be leases which could be beneficial for businesses. The most obvious being operating leases that are now service contracts - as assets may not be identified to a specific lessee or the lessee can't direct the assets use.

With that in mind we created a factsheet to guide you through the changes under the new accounting standards:

Please don't hesitate to contact us to learn more about what are the new accounting standards under the IFRS16 and how can our lease management system help your business through this transition.

Quadrent is Australasia's leading and most trusted equipment financier and lease portfolio software provider. We enable you to deliver your technology solution via a leasing structure, and manage and report on your lease & asset portfolio for compliance with IFRS 16. Find out more about our services.

LOIS provides you with a consolidated view of all leases within your business structure and full IFRS 16 compliance, whether it be one entity or a global corporate. LOIS refers to Quadrent’s Lease Optimization Information System, which is a fully integrated portfolio and asset management tool for all your IFRS16 lease accounting compliance. We operate it under a master agreement. Plus, we’re the only supplier in Australasia. Read more about LOIS.

If you're interested in understanding more about IFRS 16 Compliance and LOIS, here are a couple of resources we can provide:

• Read more about IFRS 16 considerations and COVID19.
• Read about LOIS features and benefits and the clients that are already on board with us 
• Explore the pros and cons of using spreadsheet applications such as Excel for the transition to IFRS 16 with this short whitepaper (15 minute read).
• Let our recent survey results from LOIS customers demonstrate the value of the product (3 minute read)
• Understand the pros and cons of leasing business assets with our whitepaper (15 minute read).