FRAG is seeking the views of constituents on the specific matters raised in this document and any other issues considered relevant to EFRAG's endorsement advice.
IFRS 16 replaces IAS 17 Leases and associated interpretations. IFRS 16 eliminates the classification of leases as either finance or operating for lessees and requires lessees to recognise assets and liabilities for all leases, with some optional exemptions. It substantially retains the lessor accounting from IAS 17.
IFRS 16 will become effective for annual periods beginning on or after 1 January 2019, with earlier application permitted under certain conditions.
EFRAG's overall preliminary assessment is that IFRS 16:
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meets the qualitative characteristics of relevance, reliability, comparability and understandability required to support economic decisions and the assessment of stewardship, and raises no issues regarding prudent accounting (Appendix 2);
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is not contrary to the true and fair view principle (Appendix 2);
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would improve financial reporting, compared to the standard and the interpretations it replaces (Appendix 3); and
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would not put European entities at a competitive disadvantage taking into account the lack of convergence with the equivalent US GAAP Standard (Appendix 3).
EFRAG has also prepared a preliminary assessment of the cost and benefits expected to arise from the application of IFRS 16 (Appendix 3). However, EFRAG has not yet assessed whether it would reach an acceptable cost-benefit trade-off.
During the consultation period, EFRAG will be conducting additional work on a number of topics:
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additional research on the impact of IFRS 16 on SMEs;
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additional outreach with users of financial statements; and
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obtain evidence and input from an economic study it has commissioned on the effect analysis of IFRS 16.
EFRAG is expecting significant additional input into its assessment from this additional work and has not yet reached a preliminary conclusion as to whether IFRS 16 is conducive to European Public Good.
Comments no later than: 08/12/2016.
Full press release
© EFRAG - European Financial Reporting Advisory Group
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