With the adoption of IFRS 16 in annual reporting periods beginning on or after 1 January 2019, which supersedes IAS 17 (Leases), it has brought changes to the recognition of leases, where both operating and finance leases are capitalised on the balance sheet and are no longer differentiated.

The accounting recognition requires the recognition of an asset (Rights of Use / ROU) and a corresponding fair value of the lease liability as at commencement of the lease. The annual accounting treatment in the income statement is that there shall be a depreciation of asset and finance expense. Hence, in the Cash Flow Statement under the captioned Cash Flow from Operation, rental payments are no longer reflected.

The impact of IFRS 16 is pronounced in entities that have high operating leases such as airlines, retail chains, telecommunication, and any businesses that need to sign leases. The manner of computation for such entities is not conventional for preparation of the projected free cash flow, discount rate to be applied and terminal value computation. This also requires in-depth understanding of finance to be able to interpret the results. In addition, IFRS 16 also has given rise to an alternative approach to use EV/EBITDAR instead of EV/EBITDA.

We are pleased to provide the services on how to perform the following:-

(a) Fair value of such entities which includes how to apply the correct technique to prepare the projected free cash flow, the computation of discount rate and terminal value

(b) How to perform impairment testing and how to interpret the results

(c) Provide Bloomberg snapshot evidence to support market-based input computation

(d) Provide and explain the difference between the measurement of EV/EBITDA and EV/EBITDAR together with Bloomberg evidence of such figures.

Drop us an inquiry at yvonne@aer.finance to arrange an appointment and we shall be pleased to arrange a virtual Teams discussion to address your requirements based on convenient timing to be agreed upon.