What is the objective of IFRS 16?

• A. To simplify lease accounting
• B. To provide principles for recognition, measurement, presentation and disclosure
• C. To require all leases to be expensed immediately
• D. To restrict disclosures

Answer: (B)

IFRS 16 sets out a single, comprehensive model for lease accounting that reflects the substance of lease arrangements in financial statements. The key aim is to provide principles for recognition, measurement, presentation and disclosure of leases, so readers get a consistent and faithful view of a lessee’s and a lessor’s obligations and rights across different contracts. In practice, this means recognizing a right-of-use asset and a lease liability for most leases, with disclosures that give a clear picture of the leasing activities and their impact on financial position and performance. There are exemptions for certain short-term or low-value leases, but the overall objective centers on a unified approach to recognition, measurement, presentation and disclosure, rather than merely simplifying accounting, expensing all leases immediately, or restricting disclosures.