IFRS 16 · Government & Public Sector

IFRS 16 Lease Calculator
for Government & Public Sector

Pre-configured for government and public sector entities with IPSAS alignment considerations, peppercorn lease treatment, and public accountability transparency requirements.

Lease Terms

If checked, ROU asset depreciates over useful life instead of lease term (IFRS 16.32)

IFRS 16 Lease Audit Working Paper Template & Checklist — free PDF

Quick reference card, IBR documentation template, lease assessment flowchart, and audit working paper template. Plus one practical audit insight per week.

No spam. Unsubscribe anytime.

IFRS 16.26 — At the commencement date, a lessee shall measure the lease liability at the present value of the lease payments that are not paid at that date.

IFRS 16.23–24 — At the commencement date, a lessee shall measure the right-of-use asset at cost.

ISA 500 — Sufficient appropriate audit evidence for the lease liability as independent audit evidence.

ISA 540 — Auditing accounting estimates — applies to the IBR determination and lease term judgment.

IFRS 16 for Government & Public Sector — Practical Guidance

Government and public sector entities face a unique IFRS 16 landscape because many do not apply IFRS directly — instead, they follow International Public Sector Accounting Standards (IPSAS) or local government accounting standards. IPSAS 43 Leases, effective from 2025, mirrors much of IFRS 16 but includes public sector-specific modifications for concessionary leases (leases at below-market terms). However, some government entities apply IFRS directly (government-owned corporations, state-owned enterprises), and this calculator serves those entities as well as those applying IPSAS 43 for lease measurement purposes.

Measurement Considerations for Government & Public Sector

For government entities, the discount rate presents a fundamental question: should a government entity use a risk-free rate or an entity-specific borrowing rate? IPSAS 43 generally follows IFRS 16 in requiring the interest rate implicit in the lease (if available) or the lessee's IBR. For government entities, the IBR may be derived from government bond yields of appropriate maturity. For sub-national governments (municipalities, provinces), the IBR reflects the entity's specific borrowing capacity, which may differ from sovereign borrowing rates.

ROU Asset Depreciation for Government & Public Sector

Peppercorn leases and concessionary leases are common in the public sector — government departments occupying Crown Estate property, municipalities leasing land from national government at nominal rents, or agencies using premises provided by parent departments. Under IPSAS 43, concessionary leases are initially measured at fair value or cost. If measured at fair value, the difference between fair value and the lease liability at nominal payments is recognised as revenue (a day-one gain representing the below-market benefit). This differs from IFRS 16's cost model approach.

Industry-Specific Considerations

Public accountability requirements mean government IFRS 16 disclosures serve a different audience than private sector disclosures. Taxpayers, legislators, and oversight bodies need to understand the total lease commitments of government entities. Whole-of-government consolidated financial statements aggregate lease liabilities across all government departments and agencies, providing a comprehensive view of the government's lease obligations. For entities preparing for IPSAS 43 transition, this calculator can serve as a validation tool for lease calculations even if the entity ultimately applies IPSAS-specific treatments.

Worked Example: 10-Year Government Office Lease

A government agency leases office premises for 10 years commencing 1 July 2025. Monthly rent is €10,000 payable in arrears. The agency uses a government bond-derived IBR of 3.0%. Initial direct costs total €15,000 (legal and relocation).

Initial Liability
€1,034,870
Initial ROU Asset
€1,049,870
Total Interest
€165,130
Total Payments
€1,200,000

Audit Considerations

Auditors of government entities should consider the additional assurance requirements imposed by supreme audit institutions (national audit offices). INTOSAI standards complement ISA requirements. For IPSAS 43 first-time adoption, transitional provisions parallel those in IFRS 16 — modified retrospective approach with practical expedients available.

Frequently Asked Questions — Government & Public Sector

Does IPSAS 43 differ from IFRS 16 for lease measurement?
IPSAS 43 largely mirrors IFRS 16 for lease measurement — the present value calculations, effective interest method, and ROU asset measurement are essentially the same. The key difference is the treatment of concessionary leases (below-market leases), where IPSAS 43 provides options not available under IFRS 16. IPSAS 43 also includes specific guidance on leases between government entities (intra-government leases) and on the accounting by lessors, which is more extensively developed than IFRS 16's lessor guidance.
What discount rate should a government entity use?
Government entities typically use a rate derived from government bond yields of similar term. For national governments, sovereign bond yields provide a direct reference. For municipalities and sub-national entities, adjust for the entity's specific credit standing if it differs from the sovereign. Some jurisdictions prescribe discount rates for government accounting — for example, HM Treasury in the UK specifies rates through the Green Book and PES papers.
How are peppercorn leases between government departments handled?
For whole-of-government consolidated financial statements, intra-government leases are eliminated on consolidation. For individual entity financial statements, the treatment depends on the framework. Under IPSAS 43, concessionary leases can be measured at fair value or cost. If measured at fair value, the day-one gain represents the benefit of below-market terms. Under IFRS 16, measure at actual payments (minimal liability for peppercorn leases).
Does IFRS 16 apply to government-owned state enterprises?
Yes, if the state-owned enterprise prepares financial statements under IFRS (which many do, particularly listed entities or those with international operations). Government-owned corporations, sovereign wealth funds, and state enterprises applying IFRS use the same IFRS 16 requirements as private sector entities. The only difference is the IBR, which may benefit from implicit government support.
How do I handle a lease inherited through machinery-of-government changes?
When functions (and associated leases) are transferred between government entities, the receiving entity recognises the ROU asset and lease liability at the transferring entity's carrying amounts. This is consistent with the general public sector approach to machinery-of-government transfers, which uses carrying amounts rather than fair values. Document the transfer and ensure both entities adjust their financial statements in the period of transfer.

Other IFRS 16 Calculators

← General Calculator Not-for-Profit Healthcare General Real Estate Energy & Utilities Manufacturing Retail Banking & Finance Insurance Technology Construction Transportation & Logistics Hospitality Agriculture
Materiality Calculator Going Concern Checklist Sampling Calculator