BLM17010 - IFRS 16 accounting: Scope and exemptions

This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.

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.