IFRS 16 (EU-endorsed) / FRS 102 Section 20

IFRS 16 Lease Calculator
Ireland

IFRS 16 lease calculator with Ireland-specific regulatory context, Irish Auditing and Accounting Supervisory Authority (IAASA) expectations, and local inspection findings.

Lease Terms

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

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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 in Ireland — IFRS 16 (EU-endorsed) / FRS 102 Section 20

Ireland adopted IFRS 16 through EU endorsement for listed companies and their consolidated groups. Non-listed Irish entities reporting under FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) follow Section 20 Leases, which retains the operating/finance lease classification. The Irish Auditing and Accounting Supervisory Authority (IAASA) supervises financial reporting by public interest entities and audits of public interest entities. Chartered Accountants Ireland and CPA Ireland are the principal professional bodies.

Regulatory Context — Irish Auditing and Accounting Supervisory Authority (IAASA)

IAASA has included IFRS 16 in its financial reporting examination priorities. Key IAASA observations include: the need for entity-specific IBR determination, adequate disclosure of upward-only rent review implications, and clear explanation of the impact on key financial metrics. IAASA has published specific observations on the quality of IFRS 16 disclosures by Irish public interest entities, highlighting areas for improvement.

Practical Guidance for Ireland

For Irish entities, the IBR should reference Irish and Eurozone market rates. Irish Government bond yields provide the sovereign risk-free rate, with entity-specific credit spreads added. Irish commercial lease law has historically included upward-only rent review clauses (where rent can only increase, never decrease, at review dates). The Land and Conveyancing Law Reform Act 2009 banned upward-only rent reviews for new commercial leases from 28 February 2010, but leases entered before this date retain the upward-only provision. For pre-2010 leases, the upward-only mechanism affects the IFRS 16 variable payment assessment — if rent is linked to open market reviews with an upward-only floor, the current rent is the minimum included in the lease liability.

Audit Expectations

Irish audit firms follow ISA (Ireland), which incorporates ISA with Irish-specific additions. IAASA's audit inspection findings have highlighted IFRS 16 as an area requiring improvement in audit quality, including insufficient IBR challenge and inadequate lease term documentation for material properties.

Ireland-Specific Considerations

Ireland-specific considerations include the significant multinational presence. Many Irish entities are subsidiaries of US or international groups, requiring determination of entity-specific IBRs rather than applying parent company rates. The Irish tax treatment of leases is governed by the Taxes Consolidation Act 1997 — operating lease payments are deductible, and IFRS 16 does not change the tax treatment. For Irish REITs (established under the Finance Act 2013), the IFRS 16 impact on distributable income calculations may be relevant, though REIT tax provisions focus on property rental income rather than accounting profit.

Common Inspection Findings

Multinational subsidiary IBRs not adjusted from parent group rates

Upward-only rent review implications not reflected in lease calculations

Lease completeness not tested for embedded leases in IT and facility contracts

Pre-2010 and post-2010 lease law distinction not applied in term assessments

IFRS 16 impact on distributable reserves not adequately assessed for Irish entities

Frequently Asked Questions — Ireland

Does FRS 102 follow IFRS 16 in Ireland?
No. FRS 102 Section 20 retains the operating/finance lease classification. FRS 102 applies to non-listed Irish entities. IFRS 16 applies to Irish entities preparing IFRS consolidated financial statements — primarily listed companies on Euronext Dublin.
How do upward-only rent reviews affect IFRS 16?
For leases entered before 28 February 2010 with upward-only rent reviews, the current rent is the minimum payment included in the lease liability. The upward-only floor means the rent can only increase at review dates. This creates variable payments linked to open market rent with a floor — include the current rent level in the lease liability measurement and recognise any increase when the rent review triggers an actual payment change.
What has IAASA identified regarding IFRS 16 reporting quality?
IAASA has identified: generic IBR disclosures, insufficient explanation of lease term judgments, inadequate quantification of the IFRS 16 impact on EBITDA and leverage, and limited sensitivity analysis for material assumptions. IAASA expects Irish public interest entities to provide entity-specific, informative disclosures.
What IBR sources are available for Irish entities?
Irish Government bond yields provide the sovereign component. Entity-specific credit spreads can be derived from bank borrowing margins, corporate bond yields (for larger entities), or indicative rates from lending institutions. For property leases, Irish commercial mortgage rates provide a direct reference. ECB data and Irish market rate publications support the IBR determination.
How should multinational Irish subsidiaries determine their IBR?
Irish subsidiaries of multinational groups should determine entity-specific IBRs reflecting Irish market conditions, not the parent's borrowing rate. However, an implicit guarantee from a creditworthy parent may reduce the entity's credit spread. Document whether the IBR reflects standalone or supported credit risk, and ensure consistency with the group's approach across all subsidiaries.

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