What must a lessee disclose?
| Item | Detail |
|---|---|
| Depreciation of right-of-use assets | By class of underlying asset |
| Interest expense on lease liabilities | For the period |
| Expense for short-term leases | If the exemption is used |
| Expense for low-value leases | If the exemption is used, excluding short-term low-value leases |
| Variable lease payments not in the liability | Such as turnover-based rent |
| Income from subleasing right-of-use assets | If any |
| Total cash outflow for leases | All lease payments in the period |
| Additions to right-of-use assets | For the period |
| Gains or losses on sale and leaseback | If any |
| Carrying amount of right-of-use assets | At the end of the period, by class |
| Maturity analysis of lease liabilities | Under IFRS 7, separately from other financial liabilities |
The standard asks for these quantitative items in a tabular format, unless another format is more appropriate. Items can be presented elsewhere in the financial statements and cross-referenced.
What qualitative information is needed?
Enough to understand the company's leasing activities: the nature of its leases, future cash outflows it is exposed to but has not included in the liability, such as variable payments, extension and termination options, residual value guarantees and leases not yet commenced, restrictions or covenants imposed by leases, and sale and leaseback transactions.
An example: the maturity analysis
For a five-year lease of CU 100,000 a year, at the end of the first year the lessee has four undiscounted payments left. A maturity analysis shows the undiscounted cash flows by time band and reconciles them to the liability:
| Undiscounted lease payments due | CU |
|---|---|
| Within one year | 100,000 |
| One to five years | 300,000 |
| After five years | None |
| Total undiscounted payments | 400,000 |
| Less future interest | (45,405) |
| Lease liability at the end of year 1 | 354,595 |
The time bands are a judgement; companies with long property leases often add more bands beyond five years. See lessee accounting step by step for the schedule behind these figures.
What must a lessor disclose?
- Finance leases: selling profit or loss, finance income on the net investment, income from variable payments not in the net investment, and a maturity analysis of undiscounted lease payments receivable for each of the first five years and a total thereafter, reconciled to the net investment.
- Operating leases: lease income, separately showing income from variable payments, and a maturity analysis of undiscounted payments receivable for each of the first five years and a total thereafter.
- Both: qualitative information about leasing activities and how the lessor manages the risk associated with any rights it retains in the underlying assets.
Where do leases appear in the primary statements?
Right-of-use assets and lease liabilities are presented separately or disclosed by line item; interest on lease liabilities is a finance cost, in the financing category under IFRS 18; and lease principal payments are financing cash flows. See the IFRS 18 cash flow changes.
What do regulators and auditors look for?
Common findings in reviews of IFRS 16 disclosures include: a missing or unclear explanation of how the incremental borrowing rate was set; extension and termination options affecting future cash flows that are not described; maturity analyses that mix lease liabilities with other borrowings or show discounted amounts; and expenses for exempt or variable leases that are not separately disclosed. A short, specific accounting policy note, written for the company's own leases, avoids most of these.
How much detail is enough?
Disclosure follows materiality. A company with a few car leases may need only a short note; one whose stores or towers are mostly leased needs detail by class of asset, the main judgements on lease terms and discount rates, and the exposures not yet in the liability.
Practical tips
- Build the disclosure from the lease register, by class of asset, so depreciation, additions and carrying amounts reconcile.
- Collect the expense for exempt and variable leases from the ledger separately; it is easy to miss.
- Check that the total cash outflow agrees to the cash flow statement.
Need help applying the standards?
Our Chartered Accountants help finance teams and students apply IFRS and US GAAP to real transactions.
Questions people ask
What does IFRS 16 require lessees to disclose?
Right-of-use assets and depreciation by class, interest on lease liabilities, expenses for exempt and variable leases, total cash outflow, additions, and a maturity analysis of lease liabilities, plus qualitative information.
Is a maturity analysis of lease liabilities required?
Yes, under IFRS 7, presented separately from other financial liabilities.
What maturity analysis do lessors provide?
Undiscounted lease payments to be received for each of the first five years and a total for the years after.
Must IFRS 16 disclosures be in one note?
They should be in a single note or section, though some items may be cross-referenced from elsewhere.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.
Related guides
More in IFRS 16
This guide is general information. It is not tax or legal advice for your situation.