SFRS 116: Key Issues to Address

SFRS 116 aims to provide a more faithful representation of leases as the asymmetry existing between the accounting for leases by lessees and lessors is removed. Financial impact is expected when operating leases that would be recorded off the balance-sheet under SFRS 17 are now taken to balance sheet and there would be differences in the timing of the recognition of the corresponding expenses over the lease term. SFRS 116 is effective for annual periods beginning on or after 1 January 2019.  

In the transition to SFRS 116, there could be accounting and operational considerations such as the following:

• Which of those contracts that I have entered or will be entering into contain leases that need to be accounted for under SFRS 116 and which of those contracts are actually service contracts? 
• What are the types of data that I need to collate and/or estimate? 
• Given the number of contracts that I have, how do I manage these contracts systematically to optimize operational efficiency and accounting accuracy? 
• What are the practical expedients and transition options that are made available by SFRS 116, and which of those would benefit me?
• How would the application of the new standard affect my financials now and going forward and do I need to relook at my contracts so as to better reflect the substance of the transactions?