Post-implementation Review of IFRS 16 – preparing for the RFI

The purpose of the PIR will be to assess whether, overall:

• the requirements of the standard are working as intended;
• the benefits to users of the information reported are not significantly lower than expected; and
• the implementation costs for preparers are not significantly higher than expected.

The primary goal of this month’s discussions was to decide on the questions to be included in the Request for Information (RFI), which the IASB is planning to publish in June this year.

By the end of the meeting, the Board had tentatively decided to include questions to assess whether:

• the lease-term requirements provide a clear and sufficient basis, and can be applied consistently;
• the benefits to users of the lease-term information reported are not significantly lower than expected;
• the requirements on variable lease payments provide a clear and sufficient basis to determine what payments should be included in the measurement of the lease liability;
• the discount rate requirements provide a clear and sufficient basis, can be applied consistently, and do not have significantly different effects from what was expected;
• the ongoing costs associated with reassessments of lease liability or lease modifications are not significantly higher than expected;
• the benefits to users of the information reported on lease-related cash flows are not significantly lower than expected;
• action is needed in relation to how a lessee distinguishes between a lease modification (as defined in IFRS 16) and an extinguishment (or a partial extinguishment) of a lease liability (to which IFRS 9 applies) when the only change to the lease contract is the lessor’s forgiveness of lease payments due from the lessee;
• action is needed in relation to how a seller-lessee applies the requirements of IFRS 15 when assessing whether a sale and leaseback transaction is accounted for as a sale of the asset;
• action is needed in relation to partial gain or loss recognition for sale and leaseback transactions, bearing in mind the differences from the revenue recognition model in IFRS 15.

Conversely, the IASB decided not to include questions on:

• the comparability of IFRS 16 financial statements and those published by entities applying FASB ASC Topic 842;
• identifying leases;
• accounting for leases by lessees;
• the lack of specific requirements for lessees to account for non-cash consideration;
• the potential consequences that the lessee accounting model could have on the lessor accounting model; and
• sale and leaseback transactions with variable lease payments that do not depend on an index or rate.

Although they are tentative at this stage, these decisions on the questions to be put to stakeholders give an insight into the topics that the IASB may be prepared to reexamine as part of the Post-implementation Review of IFRS 16