The revolution in leasing accounting is coming

From 1 January 2019, in accordance with the new IFRS 16 standard, lessees will recognize almost all lease transactions on the balance sheets as a financial liability and as a right of use of an asset.

According to IAS 17, being currently in force, leased assets are recognized on an off-balance sheet as an operating lease or on the balance sheet as a finance lease.

The transition to IFRS 16 is a revolutionary change in the management of the company contracts. Adaptation to the provisions of the new standard requires the execution of an inventory and analysis of all leasing, lease and rental agreements in the company and recognition of them on the balance sheet in the form of a financial liability and the right to use the asset.

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myLease Manager - a tool supporting calculations
in accordance with IFRS 16

more about myLease 

Companies must adapt their accounting policies, business processes and IT systems to the new IFRS 16 principles

The changes will influence on:

Financial indicators

IFRS 16 will affect almost all of the most frequently used financial ratios

The balance sheet total will increase, the leverage ratio will deteriorate, and the efficiency ratios will decline, as both the nature of leasing fees and the pattern of their recognition will change.

These changes can have a very significant impact on business contracts with various stakeholders, such as banks and lenders, investors and analysts, and employees. Some companies will also verify their current approach to the method of obtaining fixed assets (purchase on credit vs. leasing).


Business processes

The accounting and financial effects are only the tips of the iceberg

Until January 1, 2019, companies must analyze their lease agreements as well as lease and other services that may meet the criteria of leasing under the terms of the new standard.

In the process of contract analysis, apart from the accounting department, specialists from other departments should also be involved, in which the business processes of IFRS 16 will trigger the greatest changes. This applies in particular to such departments as IT, supplies, taxes, cash management, legal and operational issues, real estate and human resources.


IT systems

IT systems must ensure the appropriate quality of data necessary to make calculations

Under IFRS 16, companies are required to analyze much more data from leasing contracts - about 30 parameters from contracts are re-identified.

PwC can help you achieve an efficient and effective transition to IFRS 16

We support companies at every stage of implementing IFRS 16:

Accounting issues

  • identification of contracts falling within the scope of IFRS 16
  • analysis of selected representative contracts and development of their accounting recognition in accordance with IFRS 16
  • defining key assumptions and management judgments
  • updated accounting policies


Determining the discount rate

  • assessment in which cases the marginal lending rate should be applied
  • support in creating a model for the marginal lending rate and documentation for individual types of leasing contracts
  • estimation of the marginal lending rate taking into account: risk-free rate, risk margin, asset security

Collecting data

  • identification of parameters required to record contracts in accordance with IFRS 16
  • identification of data sources
  • collecting data from contracts within the scope of IFRS 16

Ensuring the quality of data

  • review of collected data to identify gaps in data
  • working out a recovery plan to supplement / correct data
  • data quality assessment in terms of completeness, accuracy, and consistency
  • analytical procedures to assess the quality and integrity of the data

Implementation of the tool for IFRS 16 - myLease Manager

  • implementation of a tool supporting calculations in accordance with IFRS 16
  • required tool adaptation in the list of parameters
  • designing a batch file for automatic data import / manual filling
  • training and preparation workshops for users and tool administrators

Learn more about myLease

Design and implementation of processes

  • process analysis (with emphasis on the accuracy and completeness of data) affecting data sources necessary for reporting in accordance with IFRS 16
  • "walk-through" procedures in areas essential for collecting and maintaining data necessary for reporting in accordance with IFRS 16
  • identification of weaknesses in processes and areas requiring standardization and optimization
  • design and implementation of corrective actions in processes and implementation of appropriate internal controls

Contact us

Olena Volkova

Olena Volkova

Partner, PwC in Ukraine

Tel: +380 44 354 0404

Illia Taran

Illia Taran

Director, PwC in Ukraine

Tel: +380 50 445 0371

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