Response 1 - Aviva

Call for comments on the Request for Information—Post-implementation Review: IFRS 16 Leases

Deadline for completion of this Invitation to Comment:

Close of business, Monday 8 September 2025

Please submit to: [email protected]

Introduction

The objective of this Invitation to Comment is to obtain input from stakeholders on the UKEB's draft comment letter on the IASB's Request for Information – Post-implementation Review: IFRS 16 Leases.

Who should respond to this Invitation to Comment?

Stakeholders with an interest in the quality of accounts prepared in accordance with IFRS Accounting Standards.

How to respond to this Invitation to Comment

Please download this document, answer any questions on which you would like to provide views, and return it to [email protected] by close of business on Monday 8 September 2025.

Brief responses to individual questions are welcome, as well as comprehensive responses to all questions.

Privacy and other policies

The data collected through submitting this document will be stored and processed by the UKEB. By submitting this document, you consent to the UKEB processing your data for the purposes of influencing the development of and adopting IFRS for use in the UK. For further information, please see our Privacy Statements and Notices and other Policies (e.g. Consultation Responses Policy and Data Protection Policy)¹.

The UKEB's policy is to publish on its website all responses to formal consultations issued by the UKEB unless the respondent explicitly requests otherwise. A standard confidentiality statement in an e-mail message will not be regarded as a request for non-disclosure. If you do not wish your signature to be published, please provide the UKEB with an unsigned version of your submission. The UKEB prefers to publish responses that do not include a personal signature. Other than the name of the organisation/individual responding, information contained in the “Your Details” document will not be published. The UKEB does not edit personal information (such as telephone numbers, postal or e-mail addresses) from any other response document submitted; therefore, only information that you wish to be published should be submitted in such responses.

Questions

Request for Information – Post-implementation Review: IFRS 16 Leases

Question 1—Overall assessment of IFRS 16

1 The UKEB's draft comment letter [tentatively] concludes that:

1. The Standard is meeting its objective and that the core principles are clear. The UKEB has not been made aware of any fatal flaws in IFRS 16. (Draft Comment Letter, Appendix 1, paragraph A1)
2. The quality and comparability of the financial information about leases have been improved, and those overall improvements are not significantly lower than expected. (Draft Comment Letter, Appendix 1, paragraph A2)
3. The ongoing costs of applying IFRS 16 appear to remain high, however, this is not wholly unexpected considering the IASB's Effects Analysis for IFRS 16. (Draft Comment Letter, Appendix 1, paragraph A4)

2 We also suggest that the IASB could explore mitigating some of the ongoing costs. This could include by simplifying the discount rate requirements and removing or amending the rules based low-value and short-term exemptions to support a more principle-based application of materiality. (Draft Comment Letter, Appendix 1, paragraph A7)

Do stakeholders agree with the UKEB's [tentative] conclusions and possible mitigations to ongoing costs?

The UKEB is particularly interested to hear from users of financial statements as to whether IFRS 16 is meeting its objective to “provide relevant information in a manner that faithfully represents those [lease] transactions. This information gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of an entity."²

Applying a materiality based approach to low-value and short term exemptions would allow consistency with the approach adopted more widely in the financial statements.

Question 2—Usefulness of information resulting from lessees' application of judgement

3 The UKEB's draft comment letter [tentatively] concludes that financial information resulting from lessees' application of judgement contributes to enhanced comparability as it allows an entity to present its assessment of the facts and circumstances. (Draft Comment Letter, Appendix 1, paragraph A8)

Do stakeholders agree with the UKEB's [tentative] conclusion?

The UKEB is particularly interested to hear users' views on the impact of lessees' application of judgement on the usefulness of financial information.

Question 3—Usefulness of information about lessees' lease-related cash flows

4 The UKEB [tentatively] conclude that lease-related cash flows should be addressed as part of the Statement of Cash Flows and Related matters project currently being undertaken by the IASB (Draft Comment Letter, Appendix 1, paragraph A9).

Do stakeholders agree with the UKEB's [tentative] conclusion?

Question 4—Ongoing costs for lessees of applying the measurement requirements

5 The UKEB's draft comment letter [tentatively] concludes that that the ongoing costs of applying IFRS 16 appear to remain high. However, this is not unexpected considering the IASB's Effects Analysis for IFRS 16. (Draft Comment Letter, Appendix 1, paragraph A11)

Do stakeholders agree with the UKEB's [tentative] conclusion?

As noted above, the UKEB has suggested that the IASB could explore mitigating some of the ongoing costs. This could include by simplifying the discount rate requirements and removing or amending the rules based low-value and short-term exemptions to support a more principle-based application of materiality. (Draft Comment Letter, Appendix 1, paragraph A7). The UKEB is interested to hear stakeholder views on these suggestions, or whether there are other opportunities to mitigate the ongoing costs for lessees of applying the measurement requirements.

Question 5—Potential improvements to future transition requirements

6 The UKEB's draft comment letter [tentatively] concludes that it is not aware of any significant concerns with the transition requirements. (Draft Comment Letter, Appendix 1, paragraph A13)

Do stakeholders agree with the UKEB's [tentative] conclusion?

Question 6.1—Applying IFRS 16 with IFRS 9 to rent concessions

7 The UKEB's draft comment letter [tentatively] concludes it has not been made aware of pervasive concerns with applying IFRS 16 with IFRS 9 to rent concessions in the UK. (Draft Comment Letter, Appendix 1, paragraph A16)

Do stakeholders agree with the UKEB's [tentative] conclusion?

Question 6.2—Applying IFRS 16 with IFRS 15 when assessing whether the transfer of an asset in a sale and leaseback transaction is a sale

8 The UKEB's draft comment letter [tentatively] concludes it's view remains consistent with its response to the IASB's Post-implementation Review of IFRS 15 Revenue from Contracts with Customers (Final Comment Letter - Post-Implementation Review of IFRS 15 Revenue from Contracts with Customers), "We have not been made aware of any significant issues relating to the interaction between IFRS 15 and the requirements of other IFRS, in particular ... IFRS 16 Leases". (Draft Comment Letter, Appendix 1, paragraph A17)

Do stakeholders agree with the UKEB's [tentative] conclusion?

If your view is that the IASB should help seller–lessees determine whether the transfer of an asset is a sale, please describe your proposed solution and explain how the benefits of the solution would outweigh the costs

Question 6.3—Applying IFRS 16 with IFRS 15 to gain or loss recognition in a sale and leaseback transaction

9 The UKEB's draft comment letter [tentatively] concludes that it has not been made aware of any specific issues around applying the partial gain or loss recognition requirements. (Draft Comment Letter, Appendix 1, paragraph A18)

Do stakeholders agree with the UKEB's [tentative] conclusion?

If your view is that the IASB should improve the cost-benefit balance of applying the partial gain or loss recognition requirements, please describe your proposed solution.

Question 6.4— Other matters relevant to the assessment of the effects of IFRS 16

10 The UKEB's draft comment letter [tentatively] concludes that it has not identified any other significant matters relevant to the assessment of the effects of IFRS 16. (Draft Comment Letter, Appendix 1, paragraph A19)

Do stakeholders agree with the UKEB's [tentative] conclusion?

The UKEB is interested to hear if stakeholders have views on the IASB's decision to remove the option for "Type B leases"³ (proposed in the 2013 Exposure Draft Leases) from the final leases standard.

We note a further issue arising from the divergence in treatment between IFRS 9 and IFRS 16 in respect of certain long-term leasehold transactions (such as commercial ground rent or real estate long income transactions). In these a property is leased on a long-term basis and subsequently sub-let.

If the property is leased from and then sub-let back to the same 3rd party, the current IFRS guidance deems no transfer to take place and the asset is valued as a loan at fair value under IFRS 9. If the 3rd party acquiring the sub-let is different from the original lessor, the lease asset is held at amortised cost under IFRS 16.

This means that the accounting for similar transactions varies depending on who the 3rd party to the sublease is. A fair value option for the 'net investment in the lease' asset under IFRS 16 may help to eliminate this divergence and would also align to wider regulatory (e.g. Solvency II and Solvency UK) reporting.

Any Other Comments

The UKEB welcomes any other feedback on its draft comment letter or on the IASB's Request for Information.

11 Are there any other comments you would like to make on the IASB's Post Implementation Review of IFRS 16 Leases?

Response:

No further comments

Thank you for completing this Invitation to Comment

Please submit this document by close of business on Monday 8 September 2025 to: [email protected]

---