Lessee accounting under IFRS 16

Lessee accounting under IFRS 16

The key objective of IFRS 16 is to ensure that lessees recognise assets and liabilities for their major leases.

1. Lessee accounting model

A lessee applies a single lease accounting model under which it recognises all leases on-balance sheet, unless it elects to apply the recognition exemptions (see recognition exemptions for lessees in the link). A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make payments. [IFRS 16.22]

[IFRS 16.47, IFRS 16.49]

IFRS 16 Balance sheet Profit or loss

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What is the component approach?

What is the component approachWhat is the component approach – Property, plant and equipment (PPE) is often composed of various parts with varying useful lives or consumption patterns. These parts are (individually) replaced during the useful life of an asset.

Therefore: What is the ‘component approach’?

  • Each part of an item of PPE with a cost that is significant in relation to the total cost of the item is depreciated separately (except where one significant part has a useful life and a depreciation method that is the same as those of another part of that same item of PPE; in which case, the two parts may be grouped together for depreciation purposes [IAS 16.45]; and
  • The cost of a replacement of a
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Implementation IFRS 16 Leases Air France KLM

Implementation IFRS 16 Leases Air France KLMImplementation IFRS 16 Leases Air France KLM – In the Registration Document 2018 including the annual financial report by AIR FRANCE KLM GROUP the Group implemented IFRS 16 and IFRS 15 and IFRS 9. Here are some excerpts from the document to illustrate the effects:

[Air France KLM – 2018 Registration document – page 220]

note 2. Restatement of 2017 Financial statements

Since January 1, 2018, the Air France – KLM Group has applied the following three new standards:

IFRS 9 “Financial Instruments”

  • IFRS 15 “Revenue Recognition from Contracts with Customers”

This standard came into force on January 1, 2018.

In accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, the standard has been applied Read more