IFRS 16/TFRS 16 Leases

Almost all companies use assets through operating or finance leases. For this reason, almost all companies are affected by IFRS 16 "Leases".

For lessees, IFRS 16 requires a "lease liability" and a "right-of-use asset" to be recognised for all leases at commencement, based on future lease payments.

Effects of IFRS 16 on financial statements, systems and processes

For lessees, IFRS 16 requires a "lease liability" and a "right-of-use asset" to be recognised for all leases at commencement, based on future lease payments.

Leases increase the size of your balance sheet and adversely affect leverage and capital ratios. The standard affects commonly used financial and performance indicators such as the leverage ratio, current ratio, asset turnover, interest cover, EBIT, EBITDA, net income, earnings per share, return on capital employed (ROCE), return on equity (ROE) and operating cash flows, and these effects should be assessed.

The effects of the standard are not limited to the financial statements. Its effect on management reporting and budgeting should not be overlooked either. Reflecting the effect of leases on all types of reporting regularly and accurately also creates a need for systems and processes, particularly in companies whose business model is built on leasing and which have many complex contracts.

How can ARSEN / SFAI Türkiye help you?

Although the standard looks easy to apply in theory, its practical application is complex because it requires many assumptions and estimates. Matters specific to your company and its industry, a large number of leased assets, and leases of strategic importance to your company can make the standard harder to apply. We can help you with the following.

• Our accounting and reporting services

• Our system and process implementation services

At every stage of our 5-step transition methodology, we can support you end to end, or at any stage you choose, within a project scope tailored to your needs.

Our accounting and reporting services

We can help you analyse your specific lease contracts, compile the contract master data, assess your accounting policies, complete the calculations manually for the reporting periods required, and prepare a TFRS 16 implementation guide tailored to your company.