Financial reporting reforms; are you prepared?
IFRS16 is a new standard for reporting the value of Leasehold Interests on a company’s balance sheet. It applies to both occupiers of real estate and those with Long Leasehold Interests.
The requirements that are effective from 1st January 2019 will mean that Companies will need to report the Fair Value of their Liability under a Long Leasehold Interest as well as the Fair Value of the Right to Occupy the asset under such title structure.
Typically, owners of such assets that undertake valuations for financial reporting will already have the Fair Value of their Leasehold Interests reported in their financial statements but in order to be IFRS compliant in the future, they will now need to state two separate values.
Q1 2019 is clearly an important time for UK investors given what is happening politically but the rigor around financial reporting will continue. IFRS16 is likely to impact all owners of Leasehold Interests that report under the International Financial Reporting Standards (IFRS). Your auditors will guide you on your financial statement requirements, but it is likely that you will require formal valuation advice around the Fair Value assessments of both asset and liability. If you think this is applicable for your business, do get in touch.