AASB 16 Leases
The Australian adoption of IFRS 16: the single lessee model that puts a right-of-use asset, with its lease liability, on the balance sheet for every lease beyond the short-term and low-value exemptions, with the rules for identifying a lease, separating components, setting the lease term, measuring and remeasuring the liability, modifications, presentation and disclosure; the lessor model that classifies leases as finance or operating and accounts for each; sale and leaseback accounting; and the Australian paragraphs for not-for-profit below-market leases and public sector entities.
AASB 16 Leases is a compliance framework from Australia (Commonwealth) with 7 domains and 22 controls. The largest domains are Lessee accounting: recognition, measurement, reassessment and modifications (paragraphs 22 to 46B, Aus25.1 to Aus35.1, B42 to B47) – AASB 16 Leases (6 controls), Lessor accounting: classification, finance leases and operating leases (paragraphs 61 to 88, B53 to B58) – AASB 16 Leases (4 controls), Identifying a lease, separating components and the lease term (paragraphs 9 to 21, B9 to B41) – AASB 16 Leases (3 controls). Every control below carries what it requires and what an assessor expects to see.
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Framework Domains (7)
Identifying a lease, separating components and the lease term (paragraphs 9 to 21, B9 to B41) – AASB 16 Leases
| Code | Title |
|---|---|
| aasb-16-leases::12-17,B32-B33 | Separate lease components from non-lease components, allocating consideration on relative stand-alone prices (lessee) or under AASB 15 (lessor), unless the lessee elects by class to combine them |
| aasb-16-leases::18-21,B34-B41 | Set the lease term: the non-cancellable period plus extension periods reasonably certain to be used and termination periods reasonably certain not to be used, reassess it on significant lessee-controlled events, and revise it when the non-cancellable period changes |
| aasb-16-leases::9-11,B9-B31 | Assess at inception whether a contract is, or holds, a lease: an identified asset with no substantive supplier substitution right, and the customer's right to substantially all economic benefits and to direct its use |
Lessee accounting: recognition, measurement, reassessment and modifications (paragraphs 22 to 46B, Aus25.1 to Aus35.1, B42 to B47) – AASB 16 Leases
| Code | Title |
|---|---|
| aasb-16-leases::22-25,Aus25.1-Aus25.2 | At commencement recognise, at cost, a right-of-use asset (lease liability plus prepaid payments net of incentives, initial direct costs and restoration estimates) and a lease liability, with the not-for-profit fair value election for below-market leases |
| aasb-16-leases::26-28,B42 | Measure the lease liability as the discounted value of unpaid lease payments (fixed and in-substance fixed, index-linked variable, residual value guarantees, reasonably certain purchase options and termination penalties), discounted at the implicit rate or the incremental borrowing rate |
| aasb-16-leases::29-35,Aus35.1 | After commencement carry the right-of-use asset on a cost basis net of depreciation and impairment, adjusted for liability remeasurements, unless the investment property fair value model or the AASB 116 revaluation model applies, with the public sector cost or fair value election |
| aasb-16-leases::36-38 | Accrete interest on the lease liability at a constant periodic rate, reduce it for payments, remeasure it for reassessments and modifications, and expense excluded variable payments when the trigger occurs |
| aasb-16-leases::39-43 | Remeasure the lease liability, adjusting the right-of-use asset, with a revised discount rate for changes in lease term or purchase option assessment, and with the unchanged rate for residual value guarantee changes and index or rate changes when the cash flows change |
| aasb-16-leases::44-46B,B43-B47 | Account for a modification as a separate lease when it adds a right of use at a commensurate price; otherwise reallocate, redetermine the term and remeasure at a revised rate, recognising a gain or loss on scope decreases, with the pandemic rent concession expedient |
Lessee presentation and disclosure (paragraphs 47 to 60A, Aus59.1, Aus59.2, B48 to B52) – AASB 16 Leases
| Code | Title |
|---|---|
| aasb-16-leases::47-50 | Present right-of-use assets and lease liabilities separately or disclose their line items, show interest separately from depreciation, and classify principal payments as financing and interest, short-term, low-value and excluded variable payments by their nature in the cash flow statement |
| aasb-16-leases::51-58 | Disclose in one note the lease expense and balance amounts in a table, short-term commitments where the portfolio has changed, the AASB 140 or AASB 116 information for fair valued or revalued right-of-use assets, and a separate maturity analysis of lease liabilities |
| aasb-16-leases::59-60A,Aus59.1-Aus59.2,B48-B52 | Add the qualitative and quantitative information needed to meet the disclosure objective: nature of leasing, exposures not in the liability (variable payments, options, residual value guarantees, committed leases), covenants, sale and leaseback, the exemptions used, the rent concession expedient, and the not-for-profit below-market lease information |
Lessor accounting: classification, finance leases and operating leases (paragraphs 61 to 88, B53 to B58) – AASB 16 Leases
| Code | Title |
|---|---|
| aasb-16-leases::61-66,B53-B58 | Classify every lease at inception as finance (substantially all risks and rewards of ownership transferred) or operating, judged on substance using the examples and indicators, reassessing only on modification, and classify subleases by reference to the head lease right-of-use asset |
| aasb-16-leases::67-74 | For a finance lease recognise a receivable at the net investment in the lease, measured at the implicit rate with initial direct costs included, and for manufacturer or dealer lessors recognise revenue, cost of sale and selling profit at commencement with market-rate interest |
| aasb-16-leases::75-80 | Recognise finance income so the lessor's net investment earns a constant periodic return, apply AASB 9 derecognition and impairment, review unguaranteed residuals, and account for finance lease modifications as a separate lease, a new operating lease or under AASB 9 |
| aasb-16-leases::81-88 | For operating leases recognise lease income straight-line or on another systematic basis, keep and depreciate the asset, capitalise initial direct costs into the asset, test for impairment, recognise no dealer selling profit, and treat a modification as a new lease |
Lessor disclosure (paragraphs 89 to 97) – AASB 16 Leases
| Code | Title |
|---|---|
| aasb-16-leases::89-92 | Lessors disclose finance lease selling profit, finance income and variable income and operating lease income in a table, plus the nature of leasing activities and how retained asset risk is managed |
| aasb-16-leases::93-97 | Lessors explain significant movements in the net investment in finance leases, give annual maturity analyses of undiscounted lease payments for at least five years with a reconciliation to the net investment, and apply AASB 116 and related disclosures to operating lease assets by class |
Objective, scope, recognition exemptions and the Australian scope paragraphs (paragraphs 1 to 8, Aus3.1, Aus3.2, B3 to B8) – AASB 16 Leases
| Code | Title |
|---|---|
| aasb-16-leases::3-4,Aus3.1-Aus3.2 | Apply the Standard to every lease, including subleases, outside the five exclusions, with the Australian carve-out for service concession assets and the extension to public sector licences that are leases in substance |
| aasb-16-leases::5-8,B3-B8 | Elect, by class for short-term leases and lease by lease for low-value assets, to expense payments straight-line or on another systematic basis, treating a modified or extended short-term lease as new |
Sale and leaseback and interest rate benchmark reform (paragraphs 98 to 106) – AASB 16 Leases
| Code | Title |
|---|---|
| aasb-16-leases::104-106 | Apply the interest rate benchmark reform expedient: remeasure the liability under paragraph 42 for modifications that are a direct consequence of the reform on an economically equivalent basis, and apply the general modification rules to any other concurrent changes |
| aasb-16-leases::98-103 | In a sale and leaseback, test the transfer against the AASB 15 sale criteria: on a sale carry the leaseback right-of-use asset at the retained share of the prior carrying amount and recognise only the gain on rights transferred, adjusting off-market terms; otherwise keep the asset and recognise a financial liability |
What is AASB 16 Leases and who does it apply to?
AASB 16 Leases is a compliance framework from Australia (Commonwealth) with 7 domains and 22 controls. The Australian adoption of IFRS 16: the single lessee model that puts a right-of-use asset, with its lease liability, on the balance sheet for every lease beyond the short-term and low-value exemptions, with the rules for identifying a lease, separating components, setting the lease term, measuring and remeasuring the liability, modifications, presentation and disclosure; the lessor model that classifies leases as finance or operating and accounts for each; sale and leaseback accounting; and the Australian paragraphs for not-for-profit below-market leases and public sector entities. It is used by organisations to establish and maintain compliance with industry standards and regulatory requirements.
What does AASB 16 Leases actually require?
AASB 16 Leases has 22 controls organised across 7 domains. The largest domains are Lessee accounting: recognition, measurement, reassessment and modifications (paragraphs 22 to 46B, Aus25.1 to Aus35.1, B42 to B47) – AASB 16 Leases (6 controls), Lessor accounting: classification, finance leases and operating leases (paragraphs 61 to 88, B53 to B58) – AASB 16 Leases (4 controls), Identifying a lease, separating components and the lease term (paragraphs 9 to 21, B9 to B41) – AASB 16 Leases (3 controls). Each control defines specific requirements that organisations must implement to achieve compliance.
If I already comply with another framework, how much of AASB 16 Leases do I already cover?
AASB 16 Leases does not currently have cross-framework mappings in our system. Check back as we continuously expand our mapping database.
How do I implement AASB 16 Leases?
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