Will IFRS 16 change the lease decision?

Will the change in accounting under IFRS 16 change the way management view the decision to lease or buy and is there any value in still leasing assets?

In the past, people would save for what they wanted and purchase the item outright.  These days we live in a rapidly changing world, and except for saving for a deposit, people will want to acquire access to assets sooner rather than later.  For technology-based assets, with the constant rate of change, the option to lease rather than buy remains attractive.

Leasing assets solves several practical problems that outright ownership creates. 5 Reasons why leasing is better than buying are:

• Leasing isn’t more expensive
• Flexibility with easy upgrades
• Few responsibilities of ownership
• Leasing builds business relationships
• There is plenty of support

Leasing assets these days covers a surprising wide range of products.  Leasing remains popular with technology products due to the rapidly changing technology landscape, however is not limited to these types of products alone. Businesses can now lease anything from Art to barges to laundry equipment and ambulances.  Whatever people want and cannot afford to buy, or choose not to buy, can often be available on lease.

Initially it was thought that the fact the operating leases will now be on balance sheet would alter or wane Businesses appetite to consider leasing as an option.  The fundamentals driving the lease vs buy decision have remained the same and are not being impacted with the changing accounting standards.  Our current engagement with clients has shown that leasing remains a compelling solution when accessing equipment.

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).