FRC expects companies to expand discussion of new leasing standard in annual reports and accounts

6 Nov 2019 09:46 AM

Companies applying the new standard on lease accounting need to provide more information on its effects, according to a new report by the Financial Reporting Council (FRC).

The FRC has reviewed the interim reports of 20 companies applying International Financial Reporting Standard 16 (IFRS) ‘Leases’ for the first time.

The FRC found a number of examples of better practices, which tended to be those disclosures that were tailored to the company’s circumstances and provided more than the minimum requirements.

As required by IFRS, companies are expected to provide more information in their annual reports and accounts to help stakeholders better understand the effect of the new standard. This should include: 

• information about key accounting judgments made; for example on the identification of lease, or on assessing their length;
• clearer explanations of the specific transition choices made;
• a detailed reconciliation between the operating lease commitment under the previous standard and the new lease liability, with clear explanations for reconciling items; and
• where companies use alternative performance measures to help users of the accounts to understand the effect, these measures should be properly labelled, reconciled and explained, and not give more prominence than the IFRS measures.

A link to the review can be found here.