Publication of the Request for Information (RFI) on IFRS 16

Readers will recall that IFRS 16, published in January 2016, is mandatory for financial years beginning on or after 1 January 2019.  

Based on the information that will be gathered, the IASB aims to assess, in particular, whether the standard is functioning overall as intended and is not causing excessive costs, and will identify any amendments that may be necessary.  

The Request for Information has six sections. 

Section I: Overall assessment  

This section asks stakeholders whether:  

• IFRS 16 has achieved its objective;  
• its core principles are clear;  
• the standard improves the overall quality and comparability of financial information about leases; and  
• the ongoing costs of application are largely as expected.  

Section 2: Usefulness of information resulting from lessees’ application of judgement 

This section asks stakeholders whether:  

• the usefulness of information resulting from lessees’ application of judgement (including information about duration, discount rates or variable consideration) is largely as expected;  
• the requirements in IFRS 16 provide a clear and sufficient basis for entities to make appropriate judgements, and can be applied consistently;  
• the usefulness of financial information resulting from lessees’ application of judgement should be improved, and if so what amendments should be made and how the benefits of these amendments would outweigh their costs.  

Section 3: Usefulness of information about lessees’ lease-related cash flows

This section asks stakeholders whether:  

• the quality and comparability of financial information about lease-related cash flows that lessees present are largely as expected; and  
• if not, why not?  

Section 4: Ongoing costs for lessees of applying the measurement requirements

This section asks stakeholders whether:  

• lessees’ ongoing costs of applying the measurement requirements in IFRS 16 are largely as expected;  
• if not, why this is so and how the IASB could reduce these costs without significantly affecting the usefulness of the information provided.  

Section 5: Potential improvements to transition requirements in future standards

This section asks stakeholders whether their experience of the transition to IFRS 16 leads them to recommend that the IASB should do anything differently when developing transition requirements in future standard-setting projects.  

Section 6: Other matters relevant to the assessment of the effects of IFRS 16

This last section mainly addresses the interactions between IFRS 16 and other standards.  

The first issue concerns the interactions between IFRS 16 and IFRS 9. Stakeholders are asked:  

• how often they have observed rent concessions, with no other amendment to the lease, resulting in partial extinguishment of the lessee’s lease liability;  
• whether they have observed diversity in how lessees account for these rent concessions and how far that has had a material effect on the amounts reported and the usefulness of the information; 
• whether the IASB should improve the clarity of IFRS 16 requirements, and if so what amendments should be made and how the benefits of these amendments would outweigh their costs.  

It then turns to the interactions between IFRS 16 and IFRS 15 in two areas, the first of which concerns the transfer of control of an asset in a sale and leaseback transaction.  

Stakeholders are asked:  

• how often they have encountered difficulties in assessing whether the transfer of an asset in a sale and leaseback transaction constitutes a sale;  
• whether they have observed diversity in seller– lessees’ assessments of the transfer of control that has had, or is expected to have, a material quantitative effect, thereby reducing the usefulness of information;  
• whether the IASB should act to help seller-lessees to determine whether the transfer of an asset is a sale, and if so what solution they propose and how the benefits of the solution would outweigh their costs.  

The second aspect of the interaction between IFRS 16 and IFRS 15 concerns the recognition of gains or losses on sale and leaseback transactions.  

Stakeholders are asked:  

• whether restricting the amount of gain (or loss) an entity recognises in a sale and leaseback transaction results in useful information;  
• whether the costs of applying the partial gain or loss recognition requirements, and the usefulness of the resulting information, differ significantly from what was expected;  
• whether the IASB should improve the cost– benefit balance of applying the partial gain or loss recognition requirements. If so, stakeholders are asked to describe their proposed solutions.  

Finally, the RFI concludes with an open question regarding any further matters that should be examined as part of the IFRS 16 PIR and why, in light of the objective of a post-implementation review. 

Request for Information (RFI)