IFRS 16 Leases: The Result of the IASB and FASB Cooperation with a Focus on Differences Compared to ASC 842
IFRS 16 Leases: The Result of the IASB and FASB Cooperation with a Focus on Differences Compared to ASC 842

Author(s): Milan Gedeon
Subject(s): Business Economy / Management, Accounting - Business Administration
Published by: Masarykova univerzita nakladatelství
Keywords: IFRS 16; ASC 842; lease accounting; financial statements;
Summary/Abstract: IFRS 16 Leases was issued by the International Accounting Standards Board (IASB) on 13 January 2016. The European Union effective date was approved for periods beginning on or after 1 January 2019. The standard brings fundamental changes to lease accounting that replace previous accounting and no longer distinguishes between an operating lease and a finance lease. Accounting entities have to make many judgments and apply estimates in order to implement IFRS 16. The IASB and the Financial Accounting Standards Board (FASB) have been working jointly to improve the accounting for leases in International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP). The FASB issued a similar standard as ASC 842. The aim of the paper is to explain the impact of IFRS 16 on the financial statements and to determine the main differences between IFRS 16 and ASC 842. The aim was achieved by an analysis of IFRS 16 and comparison of the articles in IFRS 16 and ASC 842. Despite an effort to convergence IFRS and US GAAP, the standard-setters have reached the divergence regarding some aspects in the lease accounting. Companies that report under both IFRS and US GAAP will have to deal mainly with the different classification of a lease from the lessee´s point of view lessee.

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