Accounting, Reporting & Tax
Lease Accounting under IFRS 16
Summary
IFRS 16 generally requires lessees to recognise a right-of-use asset and lease liability for leases, subject to specific exceptions.
Why this matters in ship finance
Bareboat and time-charter contracts may create significant balance-sheet liabilities or contain service elements that require separation.
The concept
Whether a charter contains a lease depends on identified asset and control of use; a charter label alone is not determinative. Lessor accounting has different classification rules.
How it is used in practice
Assess substitution rights, decision-making over use, lease term, options, non-lease components and discount rate, then reconcile lease liabilities with lender covenants.
Practical issues
Do not classify every time charter as a lease or assume that freight-market terminology dictates IFRS accounting treatment.
How ShipFinance.ai uses this concept
Add a charter contract classification and lease-liability calculator.
Key takeaways
- Identify leases by control of use, not charter label.
- Lessees and lessors apply different requirements.
- Reconcile lease liabilities with financing leverage.