Under IFRS 16, a lease is defined as a contract that enables international businesses to use another entity’s identified asset for a specified period of time in exchange for consideration. Common leased assets include:
Real estate property, buildings, offices and warehouses
Office equipment
Medical equipment
IT equipment
Vehicles (automobiles, trucks, vans)
These contracts must specify a timeline in which the right-of-use of the asset is established (or an identified amount of use). It should also include all the potential economic benefits from using said asset. Simply put, some contracts that may not have been considered a lease with the original IAS 17 compliance standard, may now be a lease under IFRS 16 – and must be added to the balance sheet.