In January 2021 the IPSASB published revised proposals for leases. The proposed IPSAS is substantially aligned with International Financial Reporting Standard on Leases (IFRS® 16), unlike the earlier proposals in Exposure Draft 64, Leases issued in 2018.
Under the proposed IPSAS on leases, both lessees and lessors will be required to provide enhanced disclosures.
The proposed IPSAS requires lessees and lessors to provide information about leasing activities within their financial statements. The objective of the disclosures is to provide users of financial statements with a basis to assess the effect of leasing activities on the entity’s financial position, performance and cash flows. To achieve that objective, lessees and lessors disclose both qualitative and quantitative information.
The proposed IPSAS includes specific requirements for the presentation of the lease assets and lease liabilities and the corresponding effects on the results and cash flows in the financial statements. The quantitative disclosures are required in a tabular format, unless another format is more appropriate. Any additional information that is necessary to satisfy the overall disclosure objective should also be disclosed.
Both lessees and lessors are required to provide qualitative information about leases. Lessees should disclose the nature of the leasing activities, restrictions or covenants imposed by leases, potential cash outflows the entity is exposed to that are not included in the lease liability, and sale and leaseback transaction. Lessors should also disclose the nature of the leasing activities and how the lessor manages risks associated with those activities, including risk management on rights retained in underlying assets and risk management strategies.
These international amendments, once final, are likely to impact the local environment. The ASB has a policy to maintain alignment with the Standards issued by the IPSASB when they are consistent with its mandate and strategic objectives. The ASB will consider the impact of the amendments when the IPSASB finalises them in 2022.
Please share your views with us about these expected changes to lease accounting.
Access the proposed IPSAS and Request for Information by following this link.