IMPLEMENTATION OF IFRS-16 IN VARIOUS COUNTRIES

By Aakanksha Banthia, (finserv@vinodkothari.com)

Introduction

The International Accounting Standards Board (IASB) issued International Financial Reporting Standard 16 (IFRS 16) on ‘Leases’ in January 2016 replacing the previous accounting standard on leases, IAS 17 Leases, and related Interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). The said standard is effective from 1^st January 2019. An entity can choose to apply IFRS 16 before that date provided that it also applies IFRS 15 ‘Revenue from Contracts with Customers’. IFRS 16 was another step towards completing IASB’s project to improve the financial reporting in case of leases.

While IASB has proposed to implement IFRS 16 with effect from 1^st January, 2019, several countries which uses IFRS as a benchmark for preparing standards of accounting have not yet converged the existing leasing standards with IFRS 16. In this article we intend to capture the extent of implementation of IFRS 16 in various jurisdictions.

1. New Zealand

New Zealand Equivalent to International Financial Reporting Standard 16 Leases (NZ IFRS 16) was issued on 11 February 2016 by the New Zealand Accounting Standards Board of the External Reporting Board. The standard becomes effective for annual reporting periods beginning on or after 1^st January, 2019 with early adoption possibility. These are applicable in ‘For Profit Entities’ which includes both Public Entities and SME’s[1].

2. South Africa

In South Africa IFRS-16 is being adopted and the same will become effective from 1^st January, 2019. Here, IFRS-16 becomes applicable to both domestic public companies as well as SME’s[2].

3. Singapore

The Accounting Standards Council (ASC) issued FRS 116 Leases as the Singapore equivalent of IFRS 16. The new Singapore leases standard will be effective from 1^st January 2019 and all companies are required to get ready for the adoption and implementation of FRS 116[3] .

4. Australia

Australian Accounting Standards Board (AASB) issued AASB 16 in February, 2016 which is equivalent to IFRS 16 with extra paragraphs on Leasing Treatment for Non Profit Entities. This Standard is applicable to annual reporting periods beginning on or after 1 January 2019[4].

5. Indonesia

The Financial Accounting Standards Board of the Indonesian Institute of Accountants (DSAK IAI) has approved the Exposure Draft (DE) PSAK 73: Leases which are the result of the adoption of IFRS 16 Leases effective as of January 1, 2019. ‘DE PSAK 73: The lease’ is proposed to become effective from January 1, 2020 with an early adoption option permitted for the entity which has also applied ‘DE PSAK 72: Revenue from Contract to Customer’[5].

6. United Kingdom

The Financial Reporting Council (FRC) of United Kingdom published a feedback statement summarising respondents’ comments to its Consultation Document on updating FRS 102 for changes in IFRS. The statement also sets out the FRC’s revised approach. The FRC agrees that further evidence-gathering and analysis needs to be undertaken before any proposals to reflect the principles of IFRS 16 in FRS 102 could be made. Therefore, the FRC will not be issuing a triennial review phase 2 exposure draft later this year. Thus, IFRS 16 is not being implemented in UK from the effective date stated by IASB.[6]

7. Japan

The Accounting Standards Board of Japan (ASBJ) undertakes the endorsement process on the Standards and Interpretations (collectively referred to as ‘Standards’) issued by the International Accounting Standards Board (IASB) and issues Japan’s Modified International Standards (JMIS). ASBJ undertakes to endorse amendments in IFRS in JMIS Exposure Drafts. According to Exposure Draft 5, ASBJ wants to endorse the amendments in IFRS 16 individually. However, no other Exposure Draft has been drawn to take in effect the changes implemented in IFRS-16 and no timeline has been stated as to when they will they make IFRS 16 effective.[7]

8. Canada

The Accounting Standards Board’s (AcSB) due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB and issuing the AcSB’s own exposure draft on IFRS 16, subject to the responses to the AcSB’s exposure draft on whether the IASB’s proposals are appropriate for application in Canada, the AcSB expects that the amendments will be incorporated into Canadian GAAP in accordance with the AcSB’s strategy of adopting IFRSs for publicly accountable enterprises. Draft Exposure states the effective period of implementation will be for annual periods beginning on or after January 1, 2019. However, it is still in exposure draft and final standard has not been made effective[8].

9. United States

Financial Accounting Standard Boards (FASB) which issues US GAAP is not convergent with IFRS 16. USA equivalent Standard to IFRS 16 is Topic 842, which though amended in February 2016, does not incorporate the major changes which IFRS 16 has got in the books of the lessee. Thus, FASB is not complying with IFRS.[9]

10. India

Accounting Standard Board ICAI has issued IND AS which substantially converges with IFRS. IFRS 16 has been adopted in exposure draft of IND AS 116 Leases which has not been implemented till now. Ind AS 116 is proposed to be effective from annual periods beginning on or after 1st April, 2019[10].

Conclusion

IFRS 16 is being implemented by some developed countries, but major countries like USA is not converging with IFRS 16 and UK is also not implementing the standard on the effective date of 1^st January, 2019 and it is in draft format for most of the countries mentioned above and implementation on the effective date seems difficult. Below is a table showing the effective dates of implementation of IFRS 16 for the above mentioned Jurisdictions.

Country	Effective Date of Implementation of IFRS 16	Comments
New Zealand	Ist January, 2019
South Africa	Ist January, 2019
Singapore	Ist January, 2019
Australia	Ist January, 2019	AASB 16 includes paragraph on treatment for Non Profit Entities which is not mentioned in IFRS 16
Indonesia	Ist January, 2020	Standard is still in exposure draft form
United Kingdom	—	No exposure draft has been prepared by FRC
Japan	—	No exposure draft has been prepared by ASBJ
Canada	Ist January, 2019	Standard is still in exposure draft form
United States	—	FASB is not implementing IFRS 16
India	Ist January, 2019	Standard is still in exposure draft form