IFRS 16 Appendix B – Lessee disclosures

Application Guidance to paragraph 59

B48 In determining whether additional information about leasing activities is necessary to meet the disclosure objective in paragraph 51, a lessee shall consider:

  1. whether that information is relevant to users of financial statements. A lessee shall provide additional information specified in paragraph 59 only if that information is expected to be relevant to users of financial statements. In this context, this is likely to be the case if it helps those users to understand:
    1. the flexibility provided by leases. Leases may provide flexibility if, for example, a lessee can reduce its exposure by exercising termination options or renewing leases with favourable terms and conditions.
    2. restrictions imposed by leases. Leases may impose restrictions, for example, by requiring the lessee to maintain particular financial ratios.
    3. sensitivity of reported information to key variables. Reported information may be sensitive to, for example, future variable lease payments.
    4. exposure to other risks arising from leases.
    5. deviations from industry practice. Such deviations may include, for example, unusual or unique lease terms and conditions that affect a lessee’s lease portfolio.
  2. whether that information is apparent from information either presented in the primary financial statements or disclosed in the notes. A lessee need not duplicate information that is already presented elsewhere in the financial statements.

B49 Additional information relating to variable lease payments that, depending on the circumstances, may be needed to satisfy the disclosure objective in paragraph 51 could include information that helps users of financial statements to assess, for example:

  1. the lessee’s reasons for using variable lease payments and the prevalence of those payments;
  2. the relative magnitude of variable lease payments to fixed payments;
  3. key variables upon which variable lease payments depend and how payments are expected to vary in response to changes in those key variables; and
  4. other operational and financial effects of variable lease payments.

B50 Additional information relating to extension options or termination options that, depending on the circumstances, may be needed to satisfy the disclosure objective in paragraph 51 could include information that helps users of financial statements to assess, for example:

  1. the lessee’s reasons for using extension options or termination options and the prevalence of those options;
  2. the relative magnitude of optional lease payments to lease payments;
  3. the prevalence of the exercise of options that were not included in the measurement of lease liabilities; and
  4. other operational and financial effects of those options.

B51 Additional information relating to residual value guarantees that, depending on the circumstances, may be needed to satisfy the disclosure objective in paragraph 51 could include information that helps users of financial statements to assess, for example:

  1. the lessee’s reasons for providing residual value guarantees and the prevalence of those guarantees;
  2. the magnitude of a lessee’s exposure to residual value risk;
  3. the nature of underlying assets for which those guarantees are provided; and
  4. other operational and financial effects of those guarantees.

B52 Additional information relating to sale and leaseback transactions that, depending on the circumstances, may be needed to satisfy the disclosure objective in paragraph 51 could include information that helps users of financial statements to assess, for example:

  1. the lessee’s reasons for sale and leaseback transactions and the prevalence of those transactions;
  2. key terms and conditions of individual sale and leaseback transactions;
  3. payments not included in the measurement of lease liabilities; and
  4. the cash flow effect of sale and leaseback transactions in the reporting period.