On 13 January 2016 the IASB released IFRS 16 'Leases', completing its long-running project on lease accounting. IFRS 16 will require lessees to account for leases 'on-balance sheet' by recognising a 'right-of-use' asset and a lease liability.

IFRS 16 also:

• changes the definition of a lease;
• sets requirements on how to account for the asset and liability, including complexities such as non-lease elements, variable lease payments and option periods;
• provides exemptions for short-term leases and leases of low value assets;
• changes the accounting for sale and leaseback arrangements;
• largely retains IAS17's approach to lessor accounting; and
• introduces new disclosure requirements.

The Standard is effective for periods on or after 1 January 2019, with early application permitted in certain circumstances.

Bringing all leases on-balance sheet is controversial. The IASB has therefore made compromises to reduce the controversy, in particular exemptions for short-term and low value asset leases. As a result businesses that lease only assets such as printers and laptops will face only a limited impact. For businesses that lease 'big-ticket' assets, such as property and high-value equipment, this will however be a major change. Whatever your views on the new Standard, businesses would be well-advised to start an impact analysis sooner rather than later.