The new leases standard

What will change and how can LeasePlan support you?

After many years of discussion the International Accounting Standard Board has published the new and final lease accounting standard. It replaces the almost 20-year-old IAS 17 and comes into effect on 1 January 2019.

Under IFRS16 leaseholders must recognise most leases on the balance sheet in the form ofa lease liability and a corresponding right of use to the leased item (leaseasset) with the net present value of the lease payments, and make anappropriate entry in the accounts. The lease asset is depreciated on a straightline basis over the term of the lease. The lease liability is discounted by themonthly or annual lease payments, whereby the pro rata amount of monthly/annualinterest expense continuously declines and the monthly/annual repayment amountcontinuously increases until full repayment.

In the past, when a company decided to lease cars instead of buying them, the paymentobligation wasn’t generally reported in the balance sheet as a liability. Underthe current IAS 17 standard, the company can decide at its discretion whetherto recognise the transaction as a finance lease or an operating lease dependingon the distribution of opportunities and risks between the two parties to thetransaction. A finance lease, which is more like a purchase financed by a loan,has to be reported as both an asset and as a liability. An operating lease, onthe other hand, which is closer to a rental arrangement, is considered to be apending transaction and doesn’t have to be reported in the balance sheet, onlymentioned in the notes.

The LeasePlan Group has prepared a reporting to provide its customers with all the data needed to calculate the cash value of the lease and the lease liability.You can request access to our e-Tool FleetReporting through your local LeasePlan account manager, which specifically gives you access to the IFRS16 report. This is particularly suitable for contact persons from your accounting department or controlling.

We will beproviding further information to our customers well in advance of the entryinto effect of IFRS 16 on 1 January 2019. The information provided on thiswebsite will also be updated as necessary and your LeasePlan account managerwill be contacting you in due time in connection with this matter.