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NZ IFRS 16 changes the definition of a lease from the current evaluation in NZ IFRIC 4, and provides guidance on how to apply this new definition. As a result, some contracts that do not contain a lease today will meet the definition of a lease under NZ IFRS 16, and vice versa. This article explains the new lease definition and the three key evaluations necessary to determine that the contract is or contains a lease.

This article considers the topical area of ‘Understanding the discount rate’. Under IFRS 16 ‘Leases’, discount rates are required to determine the present value of the lease payments used to measure a lessee’s lease liability. Discount rates are also used to determine lease classification for a lessor and to measure a lessor’s net investment in a lease.