IFRS

Insights into IFRS 16: Lease term

This article relates to the important topic of ‘Lease term’. Determining the correct lease term under IFRS 16 is significant. Firstly, the longer the lease term, the larger the lessee’s right-of-use asset and lease liability will be. Secondly, the length of the lease term determines whether a lease qualifies for the short-term lease exemption. Finally, IFRS 16 contains additional application guidance on how to deal with periods covered by options to extend or terminate a lease. While this detailed guidance can be helpful, it also means there is more to consider when determining the lease term. Our article explains the key aspects of determining the lease term at commencement date and when it should be reassessed.