Feedback Statement - Post-Implementation Review of IFRS 16 Leases

File information

Publication date
16 October 2025
Format
PDF, 237.8 KB
Download original PDF

Final Comment Letter (FCL) 25 September 2025

The UK Endorsement Board (UKEB) is responsible for endorsement and adoption of IFRS for use in the UK and therefore is the UK's National Standard Setter for IFRS. The UKEB also leads the UK's engagement with the IFRS Foundation on the development of new standards, amendments and interpretations.

The comment letter to which this feedback statement relates forms part of those influencing activities and is intended to contribute to the IFRS Foundation's due process.

The views expressed by the UKEB in its comment letter are separate from, and will not necessarily affect the conclusions in, any endorsement and adoption assessment on new or amended international accounting standards undertaken by the UKEB.

Contents

Purpose of this Feedback Statement

This Feedback Statement presents the views of UK stakeholders received during the UKEB's public consultation on the draft comment letter (DCL) relating to the IASB's Request for Information (RFI) for their Post-implementation Review (PIR) of IFRS 16 Leases.

This feedback statement presents the views of UK stakeholders received during the UKEB's outreach activities on the IASB's RFI and explains how the UKEB's Final Comment Letter (FCL) addressed those views.

Description of the project

  • In June 2025, the IASB published the Request for Information on the PIR of IFRS 16 Leases.

  • The PIR assesses whether the standard is meeting its objectives, can be applied consistently, provides useful information to users, and implementation costs are as expected. The IASB's possible actions following the PIR are to:

    • produce educational materials;
    • conduct follow-up research work for possible standard setting; or
    • take no action.

  • The IASB's RFI is seeking feedback on:

    • Stakeholders' experiences relating to IFRS 16 and their overall views on the Standard;
    • Matters in IFRS 16 that the IASB has identified as areas of interest to examine further in this post-implementation review;
    • Suggestions for improvements to future transition requirements; and
    • Other information relevant to the PIR of IFRS 16 not specifically addressed in the RFI, including its relationships with the requirements in other IFRS Accounting Standards.

UKEB public consultation on the DCL

  • Prior to publishing the DCL, we gathered stakeholder feedback through:

    • Discussions with UKEB Advisory Groups:
      • Investor Advisory Group
      • Accounting Firms and Institutes Advisory Group
      • Preparer Advisory Group
    • A survey of Preparers

  • Stakeholder feedback was reflected in the DCL.

  • The DCL and ITC were published for consultation for 45 days, between 25 July 2025 and 8 September 2025.

  • During the consultation period the UKEB promoted awareness of the DCL and ITC and encouraged stakeholders to respond through News Alerts, LinkedIn posts, and the UKEB website.

  • Two formal responses from stakeholders were received, both of which are preparers.

  • One submission received was published on the UKEB website while the other one was not made publicly available at the stakeholder's request. However, this letter was made available to UKEB members.

  • The UKEB also maintained outreach with stakeholders during the consultation period.

  • All stakeholder comments and views were considered in finalising the UKEB's FCL.

Question 1: Overall assessment of IFRS 16

UKEB draft position Further stakeholder views UKEB final position
The UKEB considers that the Standard is meeting its objective and that the core principles are clear. We have not been made aware of any fatal flaws in IFRS 16. Largely supportive of UKEB draft position. Consistent with draft position.
One stakeholder raised concern about the volatility created by applying IFRS 16 to leases based upon a variable rate that are subject to substantial fluctuations in the short term. If the lease payments included in the initial measurement of the lease liability comprise variable lease payments that depend on an index or a rate, IFRS 16 paragraph 27(b) requires the lease liability to be “initially measured using the index or rate as at the commencement date". If the index, such as a shipping index, is subject to significant fluctuations in the short term, this can lead to the liability at balance sheet date not being economically representative of the actual liability if it were calculated based on the index rates expected to prevail over the majority of the lease term. The IASB considered this issue during the development of IFRS 16. They concluded (paragraph BC166 of the Basis for Conclusions of IFRS 16) that permitting the use of forecast rates of forward rates may lead to measurement uncertainty and comparability issues, and that the enhanced information obtained might not be justifiable on cost benefit grounds. The UKEB agrees with the IASB's rationale and, therefore, no amendments to the DCL have been proposed.
The UKEB considers that the quality and comparability of the financial information about leases have been improved, and those overall improvements are not significantly lower than expected. Supportive of UKEB draft position. Consistent with draft position.
The UKEB acknowledges that the ongoing costs of applying IFRS 16 appear to remain high although this is not wholly unexpected considering the IASB's Effects Analysis for IFRS 16. The UKEB proposed ways to mitigate some of the ongoing costs such as including a materiality-based approach to low-value and short-term exemptions. Supportive of UKEB draft position with one stakeholder explicitly supporting the materiality-based approach proposed by the UKEB. Consistent with draft position.

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

UKEB draft position Further stakeholder views UKEB final position
The UKEB considers 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. One stakeholder is supportive of the UKEB's conclusion while the other stakeholder neither agreed nor disagreed but only noted 'no comment'. Consistent with draft position.
UKEB draft position Further stakeholder views UKEB final position
The UKEB considers 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. Supportive of UKEB draft position. Consistent with draft position.

Question 4: Ongoing costs for lessees of applying measurement requirements

UKEB draft position Further stakeholder views UKEB final position
The UKEB acknowledges 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. There may be opportunities for mitigating some of these ongoing costs by considering simplification of some of the requirements in IFRS 16. Supportive of UKEB draft position. See also the comment made for Question 1. Consistent with draft position.

Question 5: Potential improvements to future transition requirements

UKEB draft position Further stakeholder views UKEB final position
The UKEB is not aware of any significant concerns relating to these questions, with preparers supportive of the expedient. Supportive of UKEB draft position. Consistent with draft position.

Question 6.1: Applying IFRS 16 with IFRS 9 Financial Instruments to rent concessions

UKEB draft position Further stakeholder views UKEB final position
The UKEB has not been made aware of pervasive concerns with applying IFRS 16 with IFRS 9 to rent concessions in the UK. Supportive of UKEB draft position. Consistent with draft position.

Question 6.2: Applying IFRS 16 with IFRS 15 Revenue from Contracts with Customers when assessing whether the transfer of an asset in a sale and leaseback transaction is a sale

UKEB draft position Further stakeholder views UKEB final position
The UKEB's has not been made aware of any significant issues relating to the interaction between IFRS 15 and IFRS 16 Leases. One stakeholder is supportive of the UKEB draft position while the other stakeholder raised a specific concern relating to the divergence in treatment between IFRS 9 and IFRS 16 of property leased and then sub-let to the original lessor vs to another third party. The UKEB considers that the difference in accounting treatment reflects the economics of the different transactions. Therefore, no amendments to the DCL have been proposed.
The UKEB also heard from stakeholders that IFRS 16 requirements lack clarity to enable consistent judgement, leading to diversity in practice when determining whether certain transfers of assets in a sale and leaseback transaction qualify as a sale. The UKEB's FCL reflects stakeholder feedback on the interaction with IFRS 15 in relation to sale and leaseback transactions.

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

UKEB draft position Further stakeholder views UKEB final position
The UKEB has not been made aware of any specific issues around applying the partial gain or loss recognition requirements. Supportive of UKEB draft position. Consistent with draft position.

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

UKEB draft position Further stakeholder views UKEB final position
The UKEB has not identified any other significant matters relevant to the assessment of the effects of IFRS 16. Supportive of UKEB draft position. Consistent with draft position.

Disclaimer

This Feedback Statement has been produced in order to set out the UKEB's response to stakeholder comments received on the UKEB's draft comment letter on the IASB's Request for Information for their Post-implementation Review of IFRS 16 Leases and should not be relied upon for any other purpose.

The views expressed in this Feedback Statement are those of the UK Endorsement Board at the point of publication.

Any sentiment or opinion expressed within this Feedback Statement will not necessarily bind the conclusions, decisions, endorsement or adoption of any new or amended IFRS by the UKEB.

Contact Us

UK Endorsement Board 13th Floor | 1 Harbour Exchange | London | E14 9GE www.endorsement-board.uk