The IASB has issued a request for information in connection with its post-implementation review of IFRS 16 Leases, with comments requested by October 15, 2025.

The document contains a summary of user perspectives:

• Initial feedback from users suggests that IFRS 16 is working as intended, has achieved its objective and has improved financial reporting. Most users said IFRS 16 has improved transparency and the quality of financial information they use to assess the capital employed by, and financial leverage of, lessees, particularly in industries that use leases extensively (such as retail, airlines and telecommunications). These users said recognition of leases in the statement of financial position reflects their view that leases are debt-like transactions. In relation to disclosures, users said the more detailed information disclosed in the notes to the financial statements is a meaningful improvement on the information disclosed in accordance with IAS 17.

On the other hand:

• The IASB expected IFRS 16 to reduce the need for investors and analysts to adjust amounts reported by lessees. Although a few users said the expectation was met, some other users said they continue to adjust amounts reported in accordance with IFRS 16 because, for example:
  • (a) they make their own estimates of lease liabilities based on the useful life of the leased asset (instead of the lease term determined in accordance with IFRS 16) to compare economic returns on invested capital;
  • (b) they do not view lease liabilities as debt; or
  • (c) many entities have financial covenants (including for new debt issues) based on adjusted (typically pre-IFRS 16) metrics.

Assuming that “a few” is a smaller number than “some other,” one wonders if there’s an undercurrent of disappointment there. Still, the relevance of some of those points should diminish over time, and if the financial statements provide an adequate springboard for users to make adjustments reflecting their own alternative perspectives, then what’s the problem? Here’s a portion of the IASB’s impressions on preparer views:

• Many preparers said it is unclear whether the Standard has achieved its objective because they incur high ongoing costs to apply IFRS 16 but see limited or no benefits. However, other preparers said IFRS 16 has improved their entities’ internal controls and co-ordination between the accounting and business functions….
• Many preparers said the cost of implementing IFRS 16 was high (as expected), mainly because they needed:
  • (a) to apply the new accounting model to many contracts.
  • (b) to apply significant judgement to determine discount rates and lease terms.
  • (c) to implement expensive IT solutions. Some preparers said fully developed IT  solutions were not available when they implemented IFRS 16.
• Some preparers said their ongoing costs are reasonable. However, many other preparers said they incur higher-than-expected ongoing costs, especially when measuring (or remeasuring) the lease liability.

The IASB isn’t asking of course whether IFRS 16 has made things perfect: it’s soliciting views on whether “the overall improvements to the quality and comparability of financial information about leases (are) largely as the IASB expected and whether the overall ongoing costs of applying the requirements and auditing and enforcing their application (are) largely as the IASB expected?” (italics theirs). They ask: “If your view is that the overall ongoing costs are significantly higher than expected, please explain why, how you would propose the IASB reduce these costs and how your proposals would affect the benefits of IFRS 16.” I suppose the assumption would be that at this advanced point in time, it will be hard to find bright ideas for cost reduction that wouldn’t involve unacceptably diluting the perceived benefits (for example by exempting various categories of lease arrangement). And the document notes: “Despite some concerns, most stakeholders expressed no appetite for significant changes to the requirements in IFRS 16. Most preparers said, after initial challenges, they developed accounting policies and processes for most matters that work well in practice and any fundamental changes to the Standard could result in further disruption that would outweigh the benefits of change.”

The cash flow statement might be an area in which modest tweaking of the requirements is more likely, with the document citing the following suggestions from stakeholders:

• information about non-cash transactions related to the initial recognition of leases to improve comparability between entities that lease assets and entities that borrow funds to buy assets. Some users acknowledged that the information about additions to right-of-use assets might serve as a proxy for information about a lessee’s capital expenditure.
• information about the total cash outflow for leases disaggregated into principal and interest portions.
• (presenting) the cash flows of some leases in operating cash flows to faithfully represent the substance of these transactions. Some preparers in the retail and telecommunications sectors said the decision to lease is not a financing decision (or a decision between buying or leasing an asset) but a necessity because some assets cannot be purchased (for example, retail space in a shopping mall or part of a roof leased to install telecommunications equipment).

Might be worth considering. Talking of existing processes, and dipping now into the blog mailbag, I received a message from Davud Mamedov in Azerbaijan, containing a link to a lease accounting template. I don’t do any nitty-gritty lease accounting myself, but if I did, I might look into giving it some Azerbaijanian flavour!

The opinions expressed are solely those of the author.