What IFRS 16 Means for Your Lease Portfolio

IFRS 16 has been with us for several years, but we still encounter Ghanaian businesses applying it inconsistently — or, in some cases, not at all.

The headline change

Under the predecessor standard (IAS 17), operating leases stayed off the balance sheet. Under IFRS 16, almost every lease comes onto the balance sheet as a right-of-use asset and a corresponding lease liability.

Why it matters

• Your balance-sheet total grows
• Gearing ratios shift
• Loan covenants tied to debt-to-equity may breach
• Interest cover changes (rent expense becomes depreciation + interest)

What to do

1. Build a lease register. Every contract — vehicles, photocopiers, the office building — gets logged with its term, payment schedule, and renewal options.
2. Assess each contract. Some short-term and low-value leases can stay off-balance-sheet under the standard's exemptions.
3. Calculate the right-of-use asset and liability. Discount future lease payments at the incremental borrowing rate (or the rate implicit in the lease where determinable).
4. Run scenarios. Show your CFO and your bank what the new ratios look like before year-end, not after.
5. Document your accounting policy. Have it reviewed before your auditors arrive.

Where we help

We help businesses build their lease register, run the calculations, prepare the disclosures, and brief their finance committee. Talk to us if you'd like a hand.