IFRS 16 Post-Implementation Review: Shaping the Future of Lease Accounting

When the International Accounting Standards Board (IASB) issued IFRS 16 — Leases in 2016 (effective 2019), it transformed lease accounting by requiring lessees to recognize most leases on the balance sheet. This ended the long-debated distinction between operating leases (off-balance sheet) and finance leases, increasing transparency but also introducing complexity for preparers.

In June 2025, the IASB launched the Post-Implementation Review (PIR) of IFRS 16, inviting feedback on how the standard is working in practice. With comments due by 15 October 2025, the PIR will determine whether amendments are necessary to address application challenges, improve disclosures, or streamline requirements.

For Caribbean businesses, where leasing plays a major role in industries like airlines, retail, real estate, and energy, the PIR is an important opportunity to shape the global lease accounting framework.

Background to IFRS 16

Under IAS 17, operating leases were kept off-balance sheet, creating lack of transparency and comparability. IFRS 16 changed this by:

• Requiring recognition of right-of-use (ROU) assets and lease liabilities for most leases.

• Providing limited exemptions for short-term and low-value leases.

• Introducing new disclosure requirements on lease terms, discount rates, and variable payments.

While IFRS 16 has enhanced transparency, it has also introduced significant operational burdens, especially in tracking leases, estimating discount rates, and handling variable lease payments.

What the PIR Covers

The IASB’s Request for Information (RFI) seeks feedback on:

1. Lessee Accounting

• Practicality of recognizing ROU assets and lease liabilities.

• Challenges in applying the exemption for short-term and low-value leases.

• Difficulties in handling variable lease payments.

2. Lessor Accounting

• Continuing adequacy of lessor accounting requirements (largely unchanged from IAS 17).

• Whether there is a need for greater convergence with lessee accounting.

3. Presentation and Disclosure

• Whether disclosures about leases provide useful information.

• Whether disclosure requirements are excessive or could be streamlined.

4. Other Issues

• Discount rate estimation.

• Practical application in emerging markets.

• Effects on SMEs and subsidiaries using IFRS 16 in consolidation.

Implications for Caribbean Businesses

Airlines and Shipping

Caribbean airlines and shipping companies rely heavily on leased aircraft and vessels. IFRS 16 significantly increased balance sheet liabilities, affecting leverage ratios and debt covenants.

Retail and Hospitality

Retail chains and hotels with extensive property leases face ongoing challenges in accounting for ROU assets and managing variable rent payments tied to revenues.

Energy and Industrial Sectors

Leases of heavy equipment, land, and infrastructure create complex long-term liabilities that require robust estimation and disclosure practices.

SMEs and Subsidiaries

Smaller entities applying full IFRS in group contexts face disproportionate compliance burdens, which is why the IFRS 19 disclosure framework may complement IFRS 16 for subsidiaries.

Caribbean Context and Challenges

• Jamaica: Real estate and retail leases are common. Variable lease payments tied to turnover remain a key issue.

• Trinidad & Tobago: Energy companies lease land and facilities, creating complexity in long-term liability recognition.

• Barbados and Eastern Caribbean: Hospitality companies often lease properties, vehicles, and equipment; IFRS 16 significantly impacts balance sheets.

• Guyana: Rapid expansion in oil and gas creates demand for leased infrastructure, raising questions about long-term lease disclosures.

Hypothetical Case Studies

Case 1: Jamaican Airline

• Pre-IFRS 16: Most leases off-balance sheet.

• Post-IFRS 16: Balance sheet expands significantly with ROU assets and liabilities, requiring renegotiation of covenants.

Case 2: Trinidad Retail Chain

• Variable lease payments tied to sales make liability recognition challenging.

• IFRS 16 requires disclosure and often significant judgment.

Case 3: Caribbean Hotel Operator

• Long-term leases of beachfront property must be recognized, altering debt-to-equity ratios and investor perception.

Action Plan for Caribbean Companies

1. Participate in the PIR

   • Provide feedback to the IASB by 15 October 2025.

   • Highlight industry-specific challenges (airlines, retail, tourism, energy).

2. Review Current Application

   • Conduct internal reviews of lease accounting policies.

   • Identify pain points in variable lease payments and discount rate estimation.

3. Strengthen Disclosures

   • Ensure transparency while avoiding information overload.

   • Streamline disclosures to focus on decision-useful content.

4. Board and Investor Engagement

   • Explain the impact of lease accounting on ratios and covenants.

   • Provide forward-looking insights to reassure stakeholders.

How Dawgen Global Can Help

At Dawgen Global, we guide businesses through the evolving IFRS landscape, including lease accounting. Our support includes:

• Diagnostic Reviews: Assessing lease accounting practices against IFRS 16 requirements.

• PIR Participation: Helping clients prepare responses to the IASB.

• Disclosure Optimization: Ensuring lease disclosures are meaningful and efficient.

• Training & Workshops: Equipping finance teams to manage complex lease scenarios.

• Audit & Advisory Support: Providing assurance on lease accounting estimates and disclosures.

The Post-Implementation Review of IFRS 16 is a critical moment in the evolution of lease accounting. Caribbean businesses should seize the opportunity to voice their challenges, influence future improvements, and strengthen their reporting practices.

By acting now, companies can reduce compliance burdens, improve investor trust, and ensure readiness for any forthcoming changes.

📣 Call to Action

At Dawgen Global, we help businesses across the Caribbean navigate IFRS 16 compliance and prepare for future updates. Contact our team to review your lease accounting practices and submit impactful feedback to the IASB.

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