AASB 16 Leases

AASB 16 Leases is an accounting standard that requires companies to recognize all lease agreements on their balance sheets, except for short-term or low-value leases. This means that firms must record a right-of-use asset (the leased item) and a lease liability (the obligation to make lease payments), providing a more accurate picture of their financial position. This standard aims to improve transparency and comparability by reflecting lease obligations that were previously off-balance-sheet, impacting financial ratios and lending decisions. It applies to most lease contracts, whether for property, equipment, or vehicles.