Many recent accounting standards include significant transition reliefs to make first time application simpler – IFRS 16 is no exception. Appendix C to IFRS 16 contains all the details of the transition provisions that are available.
This article sets out the transition choices that are available and discusses some of their practical implications. The final page then includes a flow chart summarising the decisions to be made.
The key takeaway is that there are a significant number of choices available and decisions about these can have a significant impact on the reported balance sheet and income statement. It is therefore important to make sure that you obtain all the data necessary to apply the Standard, and that you model the possible options to ensure you select the one that will best meet your needs.
For example, the application of the various transitional provisions could have an impact on:
- your ability to make dividend payments
- tax payments
- your banking covenants
- the attractiveness of employee bonus arrangements
- the availability of investor reliefs
- the metrics your investors use to assess your position and performance.
Download this article
Download PDF [117 kb]
Also appears under...