GAAP, nearly all leases under IFRS will be accounted for on balance sheet, however, instead of the two classifications for lessees, IFRS requires lessees to account for leases in a manner similar to finance lease accounting under ASC 842. IFRS 16 has a single lessee accounting model. While the FASB and IASB worked together jointly on these standards, a key difference is in the lessee accounting model. Similar to the FASB, the International Accounting Standards Board (IASB) issued its standard on lease accounting, IFRS 16, Leases, in 2016. The subsequent accounting will differ depending upon the lease classification. As such, at commencement of a lease, a lessee recognizes an asset for its right to use the underlying asset and a liability for its lease obligation. However, regardless of classification, all leases (other than those that qualify for the short-term lease practical expedient) are recognized on the balance sheet. This requirement significantly differs from the legacy lease accounting in ASC 840, especially for lessees accounting for operating leases.ĪSC 842 prescribes a dual model approach for lessees whereby a lease must be classified as either a finance lease or operating lease, using the classification test.
ASC 842 requires nearly all leases to be accounted for on balance sheet.
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