Share this
What is the difference between ASC 842 and IFRS 16?
by Matt Waters, CPA on April 16, 2019
Multi-national companies need to comply with both IASB and FASB and are keeping a close eye on new lease accounting standards. Both ASC 842 and IFRS 16 require nearly all leases to be reported on the balance sheets as assets and liabilities. Both capitalize all leases on the balance sheet. However, the entities do take a different stance on a few aspects of lease accounting methodology.
For example, ASC 842 offers two classification types:
- Operating leases with a straight-line expense recognition pattern
- Finance leases with a frontloaded expense recognition pattern split into interest and depreciation, much like capital lease amortization under prior guidance
Meanwhile, IFRS 16 requires one classification method for all leases;
- Accelerated expense recognition similar to FASB’s finance classification
Other differences between FASB and IASB include:
- low-value exemptions (IFRS 16 set a $5,000 threshold, ASC 842 didn’t specify)
- index-based variable payments (IFRS requires re-measurement when the index changes)
- transition approach
- initial right-of-use asset measurement
- practical expedients
There are many similarities on Day 1 of lease accounting compliance. However, moving forward the difference methodologies may represent significant implementation issues for dual reporters. These entities will need to maintain different processes and controls for each to comply with the diverse reporting requirements.
For a successful approach to lease accounting compliance, international companies with an obligation to report using multiple methodologies need a comprehensive lease accounting software solution that can track and calculate the data necessary for compliance reporting. Quality lease accounting software vendors should be able to demo IFRS 16 functionality along with ASC 842, and if dual reporting is a requirement, don’t forget to ask about functional currency capability. The two usually go hand in hand.
Share this
- ASC 842 (78)
- Lease Accounting Software (62)
- Accounting Teams (39)
- Lease Administration Software (19)
- Retail Tenants (14)
- Commercial Real Estate (11)
- Lease Management (10)
- Market Data and Analytics (7)
- Real Estate Teams (6)
- ESG (5)
- Success Stories (5)
- News and Media Coverage (3)
- Transaction Management Software (2)
- Customer Success (1)
- Office Tenants (1)
- September 2024 (2)
- August 2024 (5)
- July 2024 (3)
- June 2024 (3)
- May 2024 (4)
- April 2024 (1)
- February 2024 (1)
- December 2023 (4)
- November 2023 (6)
- October 2023 (4)
- September 2023 (2)
- August 2023 (2)
- July 2023 (3)
- May 2023 (2)
- March 2023 (1)
- February 2023 (3)
- December 2022 (3)
- November 2022 (4)
- October 2022 (4)
- September 2022 (1)
- August 2022 (4)
- June 2022 (1)
- May 2022 (4)
- April 2022 (8)
- March 2022 (3)
- February 2022 (1)
- October 2021 (2)
- September 2021 (1)
- August 2021 (15)
- July 2021 (3)
- June 2021 (1)
- May 2021 (1)
- April 2021 (3)
- March 2021 (1)
- January 2021 (1)
- December 2020 (3)
- November 2020 (1)
- October 2020 (2)
- September 2020 (2)
- August 2020 (3)
- July 2020 (2)
- June 2020 (3)
- May 2020 (1)
- April 2020 (1)
- March 2020 (1)
- February 2020 (1)
- December 2019 (1)
- October 2019 (1)
- September 2019 (2)
- August 2019 (3)
- July 2019 (2)
- April 2019 (69)
- October 2018 (1)
- August 2018 (1)
- July 2018 (1)
- June 2018 (1)
- May 2018 (1)
- April 2018 (2)
- March 2018 (3)
- February 2018 (2)
- December 2017 (1)
- August 2017 (3)
- June 2017 (2)
- May 2017 (2)
- April 2017 (1)
- March 2017 (2)
- January 2017 (2)
- November 2016 (2)
- July 2016 (1)
- June 2016 (1)
- July 2015 (1)
- March 2015 (1)
- June 2014 (1)
- April 2014 (11)
- October 2011 (1)
You May Also Like
These Related Stories