This guidance explains how lease-related income, expenses and assets should be reported in the Economic Activity Survey (EAS) following the introduction of AASB 16 Leases. It is intended as general guidance only and does not replace the requirements of AASB 16. Please refer to the AASB 16 Leases standard for definitive accounting treatments.
For links to the help pages for other industries and general information about the EAS, please see this page.
When did the AASB 16 change apply.
The change applied to annual reporting periods beginning on or after 1 January 2019. For not-for-profit entities, AASB 16 Leases is effective for annual reporting periods beginning on or after 1 January 2020.
How should the income and expenses questions be answered.
Your answers should be consistent with the Australian Accounting Standards.
Reporting income.
AASB 16 Leases does not affect the reporting of income for businesses/organisations. Operating lease income received should be included in Rent, leasing and hiring income or Income from services.
For lessors of finance leases, the capital repayment is not reported on the Economic Activity Survey and the interest component is reported as Interest Income.
Reporting expenses.
Under AASB 16, lease payments for operating leases within the scope of the Standard are generally no longer recognised solely as rent expense. Instead, lease costs are typically recognised as an interest expense on the lease liability and a depreciation expense on the right-of-use asset. In some circumstances, an additional operating expense component may also be recognised.
How should I report my operating lease expenses.
For leases that are subject to AASB 16, report the lease-related expenses according to their accounting classification, as follows:
- The interest component of operating leases should be included in Total interest expenses and Interest expenses in respect of operating leases (where present on the form)
- The depreciation component of operating leases should be included in Total depreciation and amortisation and Depreciation expenses in respect of operating leases (where present on the form)
- Short-term leases (12 months or less) should be included in Rent, leasing and hiring expenses
- Low-value leases should be included in Rent, leasing and hiring expenses
- Lease-related outgoings should be included in Rent, leasing and hiring expenses
- Other lease costs not subject to AASB 16 should be included in Rent, leasing and hiring expenses.
How should I report my right-of-use assets.
Right-of-use assets recognised under AASB 16 should not be reported as capital expenditure by the lessee. This includes assets recognised for existing operating leases, new leases, lease remeasurements and lease modifications.
Assets acquired through finance leases should continue to be reported as additions in the Capital expenditure and disposal of assets section under the appropriate asset category.
Where do I report outgoings related to my leases.
Any outgoings related to leases, such as a fire service levy or utilities charges, should be included in Rent, leasing and hiring expenses.
Is labour hire included in rent, leasing and hiring expenses.
No, labour hire is included in other questions and reported as follows:
- Payments made to another (related or unrelated) business for the supply of staff on a fee or contract basis, where the staff entitlements are paid by the business supplying the employees, should be recorded in the Labour Costs question Payments to other businesses (e.g. employment agencies) for staff.
- Any costs incurred by the business in the conduct of its own recruitment processes should be reported in Other operating expenses.
How do I report embedded leases.
Embedded leases arise when a contract contains both lease and non-lease components. Where AASB 16 requires the lease component to be separated, it should be reported in accordance with the Standard.
How should I report a lease with less than twelve months left on the contract.
Operating leases with a lease term of 12 months or less may qualify for the short-term lease exemption under AASB 16. Payments relating to these leases should be reported in Rent, leasing and hiring expenses.
Other exclusions.
Leases outside the scope of AASB 16
The following leases and arrangements are outside the scope of AASB 16 Leases:
- leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources
- leases of biological assets held by a lessee that are within the scope of AASB 141 Agriculture
- service concession arrangements within the scope of Interpretation 12 Service Concession Arrangements
- licences of intellectual property granted by a lessor that are within the scope of AASB 15 Revenue from Contracts with Customers
- rights held by a lessee under licensing arrangements that are within the scope of AASB 138 Intangible Assets, including rights relating to motion picture films, video recordings, plays, manuscripts, patents and copyrights.
Recognition exemptions under AASB 16
A lessee may elect not to recognise a right-of-use asset and lease liability for:
- short-term leases
- leases for which the underlying asset is of low value.
Where the business applies either exemption, report the associated lease expense under Rent, leasing and hiring expenses.
Short-term leases
A short-term lease is a lease that has a lease term of 12 months or less at the commencement date.
A lease containing a purchase option is not a short-term lease.
The election for short-term leases is made by class of underlying asset.
Leases of low-value assets
AASB 16 does not prescribe a monetary threshold for determining whether an underlying asset is of low value.
Assess the value of the underlying asset when it is new, regardless of the age of the asset when it is leased.
Examples of assets that can qualify as low value include:
- tablets
- personal computers
- small items of office furniture
- telephones
- similar assets.
The election for leases of low-value assets can be made on a lease-by-lease basis.
Glossary
Lessee: A lessee for the purpose of this survey is a business that obtains the right to use an underlying asset for a period of time in exchange for consideration.
Lessor: An entity that provides the right to use an underlying asset for a period of time in exchange for consideration.
Underlying asset: An asset that is the subject of a lease, for which the right to use that asset has been provided by a lessor to a lessee.
Operating lease: An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset.
Finance lease: A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset.