BLM17010 - IFRS 16 accounting: Scope and exemptions

Scope

For entities applying IFRS 16, all leases are within the scope of IFRS 16, except for:

  • leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources;

  • leases of biological assets within the scope of IAS 41 Agriculture held by a lessee;

  • Service concession arrangements within the scope of IFRIC 12 Service Concession Arrangements;

  • licences of intellectual property granted by a lessor within the scope of IFRS 15 Revenue from Contracts with Customers; and

  • rights held by a lessee under licensing agreements within the scope of IAS 38 Intangible Assets for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights.

Exemptions

A lessee may elect not to apply the requirements of IFRS 16 for short-term leases and leases for which the underlying asset is of low value.

The election for short-term leases can be made by class of asset. The election for low-value leases can be made on a lease-by-lease basis.

A short term lease is defined as a lease that at commencement date has a lease term of 12 months or less. A lease that contains a purchase option is not a short term lease.

No specific value is included within the standard for low value assets. Examples of low-value underlying assets can include tablet and personal computers, small items of office furniture and telephones (IFRS 16 B8).

If a lessee elects to take the exemptions, the lease payments associated with those leases are to be recognised as an expense on either a straight-line basis over the lease term, or some other systematic basis.