IFRS 16 Leases is the new leases standard that was published in January 2016 and will become effective January 2019. IFRS 16 will change the accounting practices for occupiers of real estate, eliminating off-balance sheet reporting and requiring them to recognise most leases on balance sheets as liabilities. For occupiers this could have a significant impact on their financial reporting and major implications in their procurement of space for occupation. One potential result could be that occupiers increasingly seek more flexible or short-term leases to manage the impact to their balance sheets and financial statement ratios.
For landlords, accounting practices are generally unchanged from IAS 17 Leases with the profit or loss recognition pattern not expected to change. However, the new standard may impact on the landlord’s offering as the requirements of occupiers change. One impact of this could be the acceleration of the current trend by occupiers to adopt workplace as a service through co-working providers.