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IAASA publishes survey of operating lease commitments in issuers’ 2015 annual financial statements

IAASA, Ireland’s accounting enforcer, has today published the results of a desk top survey it has undertaken into the commitments under operating leases as disclosed in issuers’ 2015 annual financial statements. The survey covered the 2015 financial statements of twenty-eight entities listed on the Stock Exchange.

The published document is available here.



Financial reporting standards (IAS 17 Leases) require entities to disclose their operating lease commitments in their annual financial statements.

A new financial reporting standard (IFRS 16 Leases), effective from 1 January 2019, eliminates the distinction between “operating” leases and “finance” leases in IAS 17 and all leases, subject to certain de minimus exceptions, will have to be capitalised on entities’ balance sheets.


Key survey results

IAASA’s desk top survey identified that the selected issuers have a total of €6.6bn (2014: €5.8bn) of operating lease commitments.  Therefore, “operating” lease commitment amounts, which are currently “off balance sheet”, are substantial.

Entities leasing assets will be impacted by the new financial reporting standard and will be required to “gross up” the balance sheet to make presentational changes to the income statements e.g. the operating lease rental will be replaced with a deprecation charge and an interest expense in the income statement. Financial ratios (e.g. earnings per share, earnings before interest and tax, etc) may be impacted as a consequence. Such changes may impact loan covenants for some entities.

Directors and Audit Committees are reminded that current financial reporting standards (i.e. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors) require an entity, when it has not adopted a new standard that has been issued but is not yet effective, to disclose that fact and the possible impact that initial application of the new standard will have on its financial statements.