Financial periods beginning on or after 1 January 2019.
Supersedes HKAS 17 Leases, HK(IFRIC)-Int 4 Determining whether an Arrangement contains a Lease, HK(SIC)-Int 15 Operating Leases—Incentives and HK(SIC)-Int 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
Why do we need a new standard
The previous lease accounting model required lessees and lessors to classify their leases as either finance leases or operating leases and account for those two types of leases differently. That model was criticised for failing to meet the needs of investors and analysts because it did not always provide a faithful representation of leasing transactions. In particular, it did not require lessees to recognise assets and liabilities arising from operating leases (they were "off balance sheet leases"). As a result, many investors and analysts adjusted the amounts reported in a lessee’s financial statements to reflect the assets and liabilities arising from off balance sheet leases, and make other consequential adjustments. However, because of the limited information available, the estimates made were often inaccurate. In addition, many other investors did not make adjustments. This created asymmetry and inaccuracy of information in the market.