IFRS 16 - what it means for the office market

IFRS 16 - the new accounting standard for leases will come into force on 1st January 2019.

For building owners, the changes made by IFRS 16 will be of lower significance - apart from sublease agreements, the landlord will not need to make any significant adjustments to the current accounting model.

However, office space tenants will need to significantly change the way in which they recognize their costs. The current form of operating leases will no longer be available except for short-term contracts (up to 12 months) and low-value asset leases. All other leases are to be included in the balance sheet in the same way as it is currently done for financial leasing contracts.

IFRS 16 will therefore have an impact on companies for which operating leases, such as renting office space, constitute a significant part of off-balance sheet funding.

In consequence, the new standard will be relevant for accounting departments, as well other strategic and operational teams including operations, finance and real estate, IT, legal and tax departments.

What additional changes will be introduced by IFRS 16 and how should we prepare for them? Will the new standard affect the office property market and rental volumes? More on this topic can be found in our latest report "IFRS 16 – what does the future hold?"

I hope you will find it useful and as always, please feel free to contact JLL with any questions and comments.

Download report (1.24 MB)

 

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