Australian corporate real estate lease reporting ahead of IFRS 16
Author/s: Christopher Heywood
Date Published: 03/05/2020
Published in: Volume 26 - 2020 Issue 2 (pages 131 - 148)
Abstract
To improve the transparency of companies’ financial commitments the requires companies to report their leased corporate real estate (CRE) on their balance sheets from 1 January 2019. This paper reports Australian CRE balance sheet lease reporting ahead of . This is the first time this has been reported and is also a baseline to evaluate how it changes Australian CRE reporting. 2016 Annual Reports were content analysed to identify current practices with the selected period pre-dating any effects from the standard’s introduction. Detail was limited, other than recording lease expenses. To calculate possible effects of including leased CRE these expenses were capitalised as a proxy for the standard’s methods. Indicative upper and lower end capitalisation rates added between $127.7 billion and $397.0 billion to balance sheets equating to 2.5% and 7.7% (respectively) of the owned PP&E. This also represents an additional 178.6% to 555.2% of current real estate only values. The individual sectors varied but the smallest increase exceeded 100% and the largest increase exceeded 4,000%. This clarifies past assertions about the standard’s effects on CRE Management, but it is still unclear whether changes tenure preferences towards ownership.
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Keywords
Assets - Balance Sheet - Corporate Real Estate - Ifrs 16 - International Financial Reporting Standards - LeasingReferences
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