From 2016 onward, new IFRS rules mean that lease agreements will be given the same status as investments. This means that future payment liabilities must be recorded as liabilities on the balance sheet, and their utility value must be recorded as assetsLease agreements give a company the same user rights to assets as an investment, but without having to find the capital needed for the investment.
“Being able to lease rather than invest has been a way into the market for big and small companies alike. For example, Norwegian has made great use of aircraft leasing. Knowledge about IFRS rules is not one of the key skills in House of Control. However, our systems do more than half of the work for companies that wish to report in accordance with what appears to be the applicable International Financial Reporting Standard”.
Lasse Sten, founder and CEO of House of Control
Lease agreements involve the same future liabilities and costs as a bank loan, although the company does not own the asset in question, and has not needed to take out a loan in order to procure it. So many people would say that it is about time IFRS rules require a company’s balance sheet to reflect the fact that a lease agreement involves entitlements and liabilities for many years to come – for something that in practice is similar to an asset. This is a regulatory change that will affect companies listed on the stock exchange and other major enterprises that have chosen to report in accordance with IFRS rules.