The new accounting standard for leases, AASB 16/IFRS 16, has introduced several key changes to the way leases are accounted for. Here are the main changes:

1. Single Lessee Accounting Model: Under the new standard, lessees will now have to recognize almost all leases on their balance sheets. This is a significant change from the previous standard, where lessees were not required to recognize operating leases on their balance sheets.

2. Recognition of Assets and Liabilities: Lessees will now have to recognize a lease liability reflecting future lease payments and a 'right-of-use' asset for virtually all lease contracts. This includes leases previously classified as operating leases under the old standard (AASB 117/IAS 17).

3. Depreciation of Lease Assets: The right-of-use assets will be depreciated in a similar way to other property, plant, and equipment, and the lease liability will be reduced by lease payments.

4. Interest Expense: Lessees will also have to report a front-loaded pattern of expense for most leases, even when they pay constant annual lease payments.

5. Enhanced Disclosures: The new standard also requires lessees to provide more detailed information about their leasing activities, including qualitative and quantitative requirements.

6. Changes in Lease Payments: Changes in future lease payments based on an index or rate, or due to changes in facts or circumstances, are generally accounted for by adjusting the lease liability and the right-of-use asset.

7. Short-term Leases and Leases of Low-value Assets: The new standard introduces two exemptions for lessees - leases with a lease term of 12 months or less, and leases of low-value assets. If a lessee chooses to apply these exemptions, these leases should be recognized as an expense on a straight-line basis over the lease term.

8. Impact on Lessors: For lessors, the accounting largely remains the same as under AASB 117/IAS 17. However, they are required to provide more information about their risk exposure and how they manage it.

Question

The new accounting standard for leases, AASB 16/IFRS 16, has introduced several key changes to the way leases are accounted for. Here are the main changes:

1. Single Lessee Accounting Model: Under the new standard, lessees will now have to recognize almost all leases on their balance sheets. This is a significant change from the previous standard, where lessees were not required to recognize operating leases on their balance sheets.

2. Recognition of Assets and Liabilities: Lessees will now have to recognize a lease liability reflecting future lease payments and a 'right-of-use' asset for virtually all lease contracts. This includes leases previously classified as operating leases under the old standard (AASB 117/IAS 17).

3. Depreciation of Lease Assets: The right-of-use assets will be depreciated in a similar way to other property, plant, and equipment, and the lease liability will be reduced by lease payments.

4. Interest Expense: Lessees will also have to report a front-loaded pattern of expense for most leases, even when they pay constant annual lease payments.

5. Enhanced Disclosures: The new standard also requires lessees to provide more detailed information about their leasing activities, including qualitative and quantitative requirements.

6. Changes in Lease Payments: Changes in future lease payments based on an index or rate, or due to changes in facts or circumstances, are generally accounted for by adjusting the lease liability and the right-of-use asset.

7. Short-term Leases and Leases of Low-value Assets: The new standard introduces two exemptions for lessees - leases with a lease term of 12 months or less, and leases of low-value assets. If a lessee chooses to apply these exemptions, these leases should be recognized as an expense on a straight-line basis over the lease term.

8. Impact on Lessors: For lessors, the accounting largely remains the same as under AASB 117/IAS 17. However, they are required to provide more information about their risk exposure and how they manage it.

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