IFRS 16
Definition
- Author:
- Sorbus Finance
- Reviewed by:
- Arran Turner, 11 November 2026
- Published:
How ifrs 16 works
For lessees, the standard generally requires a right-of-use asset and lease liability for leases within its scope, subject to exemptions and detailed rules. Lessor classification and tax treatment are separate matters.
Practical UK business example
A business reporting under IFRS reviews its property and vehicle leases with its accountant and assesses how recognition affects its balance sheet and financial measures.
Illustrative example only; not a finance quotation or a client case study.
Why it matters
It helps explain why a commercial lease description does not necessarily determine whether a commitment appears on the balance sheet.
Limitations and common misconceptions
Not every UK business reports under IFRS, and accounting recognition is not the same as legal ownership or tax deductibility. Revised FRS 102 has its own requirements and should not simply be treated as identical.
Discuss business borrowing to discuss how the structure relates to your business.
Further reading from Sorbus Finance
References
This definition is general information for UK businesses, not personal advice. Lender criteria and product terms vary. Sorbus Finance is a broker, not a lender.