Lease accounting (IFRS 16 vs US GAAP)
Definition · Level 10 · Valuation
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How rent on long leases is booked. Under IFRS 16, the international lease rule, most leases become a debt plus an asset and the rent turns into depreciation and interest, so it leaves operating costs. Under US GAAP, an operating lease’s cost stays inside operating costs.
Example
Brewline’s $80M of rent: EBITDA 200 under US GAAP, about 280 under IFRS 16.
Rules and market figures change: check the current ones before relying on this.
Where Tradecraft teaches it
Level 10 · Valuation, in the lesson “EBITDA: handy, but not cash”: Add back depreciation and amortization, know what EBITDA hides, and see how lease rules move it.
Related terms
- Adjusted EBITDAEBITDA after the company adds back costs it calls one-off, such as restructuring.
- Depreciation & amortization (D&A)Non-cash charges that spread the cost of long-lived assets over their useful lives: depreciation for physical assets (machines, shops, servers)…
- EBITDAOperating income with depreciation and amortization added back: a rough guide to operating cash before capital spending, comparable across companies…
- 10-K / 10-Q / 8-KFilings with the US Securities and Exchange Commission: the audited annual report, the unaudited quarterly report, and the current report for…
- Accretive buybackA share repurchase that raises earnings per share: the earnings yield of the shares bought (EPS ÷ price) beats the after-tax cost of the cash used.
- Accrual accountingRecording revenue when earned and costs when incurred, whatever the date cash changes hands.