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Lessee accounting ASC 842 requires a lessee to classify a lease as either a finance or operating lease. Interest and amortization expense are recognized for finance leases while only a single lease expense is recognized for operating leases, typically on a straight-line basis. Under IFRS 16, lessees will account for all leases in a manner similar to finance leases. Lessor accounting Under ASC 842, a sale and profit are recognized upon the commencement of a lease only when the arrangement transfers control of the underlying asset to the lessee. Under IFRS 16, selling profit is recognized on direct financing leases when performance obligations in IFRS 15, Revenue from Contracts with Customers, have been met. Statement of cash flows ASC 842 requires lessees to report the single expense associated with an operating lease as an operating activity. Under IFRS 16, lessees account for all leases similar to a financed purchase, with payments reported as a financing or operating activity in the statement of cash flows, in accordance with IAS 7, Statement of Cash Flows.

Remeasurement of variable lease payments The initial measurement of lease-related assets and liabilities is similar under ASC 842 and IFRS 16; however, subsequent changes in lease payments that vary with a rate or index (e.g., rents that increase for changes in an inflation index) are accounted for differently. Under ASC 842, such changes are recognized when incurred, unless the lessee is otherwise required to remeasure the lease liability (e.g., as a result of reassessing the lease term). Under IFRS 16, lease assets and liabilities are remeasured whenever the cash flow changes. Sale and leaseback accounting Under ASC 842, a seller-lessee would recognize the full gain from a sale and leaseback transaction that qualifies as a sale. IFRS 16 limits the recognition of gains from sale and leaseback transactions. Transition ASC 842 requires a modified retrospective approach to each lease that existed at the beginning of the earliest comparative period presented in the financial statements, as well as leases entered into after that date. IFRS 16 allowsa reporting entity to elect a full retrospective approach.