Your choice of transition option and practical expedients will affect the costs and timing of your implementation project – and your financial statements for years to come.
IFRS 16 Leases comes into effect in 2019. You have some big decisions to make, which will have lasting consequences.
Our publication Leases – Transition options (PDF 603 KB) will help you to make the choice that is right for your business.
The standard features a variety of different transition options and practical expedients for lessees. Many of them can be elected independently of each other. Some can even be elected on a lease-by-lease basis.
This means that large companies could face a huge number of possible permutations. And even a company with a relatively small portfolio of leases would have a variety of transition options.
Most of the choices you have to make on transition involve a trade-off between cost and comparability. That is, the options and expedients that simplify and reduce the costs of transition tend to reduce the comparability of your financial information.
This could affect your financial statements in your year of transition and for years to come, until the last lease in place at transition has expired.
Choosing the best transition option for your business will require thought – and probably some detailed modelling of alternative approaches.
Our Leases – Transition options (see PDF below) publication provides an overview of the transition options and expedients and how they would affect your financial statements.
It provides KPMG’s insight on the requirements and includes a comprehensive worked example modelling how the various options would affect a fictional company.