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IFRS 16 – A Compative Summary

Leases are common in the business world, and they play a significant role in the financing and operations of many companies. The term “lease” refers to a contract that allows a lessor and a lessee to utilize an asset for a certain period in exchange for a payment. Lease agreements can be classified as either operating or finance leases, and the accounting treatment for these two leases differs.

A lease is a contract that grants permission to use an asset for a specific amount of time in exchange for a payment. In addition, it must convey the right to control the use of the underlying asset. Control is defined as the right to direct the use of the asset and to obtain substantially all of the economic benefits from its use.
Under Dutch GAAP, a lease is defined similarly to IFRS 16, but there are some differences in the accounting treatment of leases. For example, under Dutch GAAP, the distinction between operating leases and finance leases is still maintained, and the accounting treatment for each type of lease is different.

Indian GAAP follows a similar approach to Dutch GAAP, maintaining the distinction between operating leases and finance leases. However, there are some significant differences in the accounting treatment of leases. For example, under Indian GAAP, the lease agreement terms, rather than the actual circumstances of the transaction, determine whether a lease is an operating lease or a finance lease.

Under U.K. GAAP, the lease definition is similar to IFRS 16, but the distinction between operating and finance leases remains. The accounting treatment for each type of lease is different, and there are some differences in how lease agreements are classified.

While the definitions of a lease under IFRS, Dutch GAAP, Indian GAAP, and U.K. GAAP are similar, there are significant differences in the accounting treatment of leases. Therefore, companies must understand these differences and ensure they comply with the relevant standards.