What is Leases (TFRS 16)? | ARSEN Audit Glossary

Q: What is Leases (TFRS 16)?

The standard requiring lessees to present almost all leases in the statement of financial position as a right-of-use asset and a lease liability. Since 2019, TFRS 16 has largely removed the distinction between operating and finance leases for lessees. Because depreciation and interest expense are recognised instead of rent expense, EBITDA increases and leverage ratios rise. There are exemption options for short-term leases (12 months or less) and leases of low-value assets.

Since 2019, TFRS 16 has largely removed the distinction between operating and finance leases for lessees. Because depreciation and interest expense are recognised instead of rent expense, EBITDA increases and leverage ratios rise.

There are exemption options for short-term leases (12 months or less) and leases of low-value assets.

Source: TFRS 16

Related terms

Right-of-use assetAn asset representing the lessee's right to use the leased asset over the lease term.Lease liabilityA liability measured as the present value of the lease payments to be made over the lease term.EBITDAEarnings before interest, tax, depreciation and amortisation; used as an indicator of the cash-like profitability generated by a company's core operations.Net debtFinancial debt and similar liabilities less cash and cash equivalents.Accounting policiesThe specific principles, bases, conventions, rules and practices an entity applies in preparing its financial statements.Amortised costThe amount at which a financial asset or liability is measured at initial recognition, minus principal repayments, plus cumulative amortisation calculated using the effective interest method.

Last updated: October 22, 2026 · This definition is for general information only.