Right-of-use assets, lease liabilities, modifications, disclosure requirements, and exemptions — every requirement of the standard, implemented deterministically by the Ledger Layer engine. No formulas to maintain. No spreadsheets to reconcile. Upload your lease data and get audit-ready output in minutes.
IFRS 16 requires lessees to recognise a right-of-use (ROU) asset and a corresponding lease liability for all leases with a term of more than 12 months, unless the underlying asset is of low value. Ledger Layer applies these scope criteria automatically at the lease level — short-term and low-value exemption flags are configurable per entity, with thresholds you set once and the engine enforces every period.
When you upload a lease, the engine evaluates the term and underlying asset value against your entity-level thresholds. Leases that qualify for exemption are flagged and routed to straight-line expense treatment. Leases in scope are measured and scheduled immediately. No manual triage required.
At commencement, the lease liability is measured at the present value of unpaid lease payments, discounted at the rate implicit in the lease — or the lessee's incremental borrowing rate (IBR) if the implicit rate is not readily determinable. The ROU asset equals the lease liability, adjusted for initial direct costs, prepayments, and lease incentives received.
Ledger Layer stores your IBR matrix as a three-dimensional lookup: currency, term band, and effective date. When the engine computes a lease, it selects the correct rate automatically based on the lease's commencement date, currency, and remaining term. No circular references. No VLOOKUP errors. The rate selection is logged in the audit trail.
After commencement, the liability is unwound using the effective interest method — each period's interest expense is calculated on the opening balance. The ROU asset is depreciated on a straight-line basis over the shorter of the asset's useful life and the lease term. Ledger Layer generates the journal entries for each period automatically during monthly close.
Every monthly close produces a complete set of journal entries: interest expense on the liability, depreciation on the ROU asset, and the cash payment allocation between principal and interest. These entries are generated idempotently — running the close twice for the same period produces identical output. The entries are immutable once approved; corrections require a reversal journal.
When a lease is modified — whether through an extension, partial termination, rent change, or scope change — IFRS 16 requires remeasurement from the modification date using a revised discount rate. Ledger Layer handles each modification type as a discrete event, triggering a fresh engine run from the modification date forward.
You record a modification by updating the lease terms in Ledger Layer. The engine recalculates the liability at the revised present value, adjusts the ROU asset (or records a gain/loss for partial terminations), and generates modification-event journal entries automatically. The pre-modification schedule is preserved in full — the audit trail shows both the original and revised treatment side by side.
Entities adopting IFRS 16 can choose either the full retrospective approach or the modified retrospective approach (with or without the practical expedient of measuring the ROU asset at an amount equal to the lease liability). Ledger Layer supports both transition methods, generating adoption-date adjustments as journal entries.
For entities transitioning from IAS 17, Ledger Layer computes the cumulative catch-up adjustment and generates the opening balance sheet entry. The practical expedient package — including the option to use hindsight for lease term assessment — is configurable per entity. All transition elections are logged and auditable.
IFRS 16 paragraphs 53–58 require extensive quantitative and qualitative disclosures. Ledger Layer generates a complete disclosure pack per entity per reporting period — every number in the pack is derived from the same engine-verified data that produced your journal entries. The PV tie-out is validated to $0.01 before the pack is written.
The disclosure pack includes ROU asset movements by class, a maturity analysis of undiscounted lease liabilities broken into time bands, weighted-average IBR, total cash outflows for leases, and short-term and low-value expense disclosures. Each figure is traceable back to the underlying lease records. No manual extraction. No transcription risk.
While IFRS 16 primarily changed lessee accounting, the standard retains the IAS 17 dual-model for lessors — classifying leases as either finance leases or operating leases. Ledger Layer supports lessor classification and measurement for entities that need to account from both sides of the lease.
For finance leases, the engine computes the net investment in the lease and generates interest income entries using the effective interest method. For operating leases, lease income is recognised on a straight-line basis. Classification is determined at inception using the five indicators in IFRS 16.63.
Every IFRS 16 calculation is performed by a version-pinned, hash-verified engine. Auditors verify the engine once — not every cell in every workbook.
Lease modifications in Excel mean restructuring formulas and hoping nothing breaks downstream. In Ledger Layer, modifications are discrete events that trigger a clean engine rerun.
Your disclosure pack is generated from the same data that produced your journal entries. No manual extraction. No reconciliation gap between JEs and disclosures.
Your IBR matrix lives in a structured, auditable table — currency by term by effective date. No VLOOKUPs. No circular references. Rate selection is logged on every lease.
Ledger Layer reads your existing workbook, applies IFRS 16 deterministically, and produces audit-ready journal entries and disclosures in minutes.