IFRS 16 compliance is a team sport. This FAQ answers the most common questions from finance and property teams — covering AASB 16, lease data, modifications, and the tools that connect both.
IFRS 16 compliance is not a finance problem. It is a data problem, and most of that data lives with your property team. Finance needs accurate lease commencement dates, payment schedules, rent review mechanisms, and option terms to calculate right-of-use assets and lease liabilities correctly. Property teams need to understand what information they are responsible for, how quickly changes need to be communicated, and what happens to the numbers when a lease is modified. This FAQ covers the most common questions from both sides: what the standard requires, how the two teams share responsibility, and what a platform like LOIS does to connect the workflow end to end. Updated April 2026.
What is IFRS 16 and why does it matter for ANZ organisations?
IFRS 16 is the international accounting standard for leases, effective from 1 January 2019. In Australia, it is adopted as AASB 16; in New Zealand, as NZ IFRS 16. The standard requires lessees to recognise almost all leases on the balance sheet, eliminating the distinction between operating and finance leases for lessees and ending the practice of keeping operating leases off-balance-sheet. For ANZ organisations, this means any commercial property lease, vehicle lease, or equipment lease (above the low-value threshold) must appear as a right-of-use (ROU) asset and a corresponding lease liability. Regulators including ASIC and the FMA actively review IFRS 16 disclosures, and auditors scrutinise them closely every year-end.
How does IFRS 16 change the balance sheet and income statement?
IFRS 16 brings leases onto the balance sheet as a right-of-use (ROU) asset and a corresponding lease liability, both measured at the present value of future lease payments. Before the standard, operating leases were disclosed in the notes: the balance sheet looked cleaner, and gearing ratios were understated. Now, every qualifying lease adds assets and liabilities simultaneously. On the income statement, the old single line of straight-line rental expense is replaced by two lines: depreciation of the ROU asset (typically in operating expenses) and interest expense on the lease liability (typically in finance costs). This affects EBITDA, EBIT, and net profit differently, which is why many organisations still disclose pre-IFRS 16 metrics alongside statutory numbers. You can read more in our post on the effects of IFRS 16 on financial statements.
What lease data does finance need from property teams for IFRS 16 compliance?
Finance teams need a specific set of lease data points to perform IFRS 16 calculations correctly, and nearly all of them originate with the property team. The core data requirements are:
Commencement date and lease term: including the non-cancellable period, plus any reasonably certain renewal options
Payment schedule: amounts, frequency, and currency, including any rent-free periods at the start of a lease
Variable payment mechanisms: CPI-linked reviews, market rent reviews, fixed step-up clauses, and the review dates themselves
Option terms: renewal options, termination options, and any conditions attached to exercising them
Lease incentives: landlord contributions, fit-out incentives, or rent-free periods provided after commencement
Make-good obligations: any contractual requirement to restore the premises at lease end
When property teams communicate this data promptly and accurately, finance can calculate the right numbers. When they do not (or when it arrives via email three weeks after the fact), the numbers go wrong, and auditors find out.
What is the incremental borrowing rate and who calculates it?
The incremental borrowing rate (IBR) is the rate of interest a lessee would pay to borrow funds to purchase the underlying asset over a similar term, with similar security, in the current economic environment. It is used as the discount rate to calculate the present value of future lease payments, which determines the size of the ROU asset and lease liability at commencement. The IBR is owned and calculated by the finance team, typically with input from treasury or the CFO. However, it depends heavily on lease-specific inputs (particularly the term and commencement date) that come from the property team. An IBR that was appropriate at commencement must be updated when a lease is modified. This interaction between property data and finance calculations is one of the most common sources of compliance errors. Our Incremental Borrowing Rate FAQ covers this in detail.
What lease information do property managers need to track for IFRS 16?
Property managers are responsible for tracking the commercial reality of each lease: the facts that drive every IFRS 16 calculation downstream in finance. Beyond the core data finance needs at commencement, property teams must maintain ongoing records of:
Upcoming rent reviews: dates, mechanisms (CPI, market, fixed), and outcomes once agreed with landlords
Option exercise windows: the dates by which renewal or termination options must be exercised, with enough lead time for a commercial decision
Lease expiry dates: and whether the organisation intends to renew, renegotiate, or vacate
Any agreed changes to lease terms: area changes, payment deferrals, landlord concessions, or renegotiated terms
Make-good and dilapidations obligations: restoration requirements that affect the carrying value of the ROU asset
A property manager who tracks these events proactively gives finance the information it needs to keep IFRS 16 numbers current. A property manager who lets events slip through the cracks creates restatements, audit findings, and the uncomfortable conversation about why the numbers are wrong.
How do lease modifications impact IFRS 16 calculations?
A lease modification is any change to the scope or consideration of a lease that was not part of the original terms, and every modification triggers a remeasurement of the lease liability using the IBR at the modification date. This is one of the most compliance-sensitive events in the IFRS 16 lifecycle. Common modifications include extending the lease term, changing the payment amount following a rent review, expanding or reducing the leased area, or renegotiating terms with the landlord. The moment a modification is agreed commercially (even if only verbally), it has accounting consequences. This is why the property team's communication speed matters so much. A delay of even a few weeks between the commercial agreement and the finance team's awareness can result in incorrect journals, misstated balances, and audit queries. For a deeper look at how good lease accounting software handles modifications automatically, see our guide to completing IFRS 16 calculations correctly.
What happens when property teams renew or extend leases mid-period?
When a lease is renewed or extended mid-period, the finance team must remeasure the lease liability and ROU asset to reflect the revised term, using the IBR at the date of the modification. This creates a new amortisation schedule and changes both the balance sheet and income statement going forward. If the extension was anticipated and included in the original lease term assessment (because renewal was reasonably certain), the numbers may already account for it and no remeasurement is needed. If renewal was not previously anticipated, a remeasurement is required from the effective date of the extension. The distinction matters, and it depends on information the property team holds: what was the original commercial intention, and when did that intention change? Getting this right requires close communication. Property must document the decision, finance must record the accounting treatment, and both teams must be aligned on timing.
How should property teams manage short-term and low-value lease exemptions?
IFRS 16 permits two practical expedients that can reduce complexity: the short-term lease exemption (leases with a term of 12 months or less) and the low-value asset exemption (individually low-value assets, typically those with an underlying asset value below USD 5,000 at commencement, interpreted in ANZ as roughly AUD/NZD 10,000). Property teams should track which leases are designated as exempt so finance can apply straight-line expense recognition rather than the full IFRS 16 calculation. However, the decision to apply these exemptions is not automatic. It is a policy choice made at the class level. An organisation that decides to apply the short-term exemption must apply it to all short-term leases in that class, and the decision affects disclosures. Property teams should not assume that a month-to-month lease or a small equipment lease is automatically exempt without checking the organisation's accounting policy. Our post on IFRS 16 exemptions explains when applying them can actually work against you.
Who owns IFRS 16 compliance: finance or property?
Finance owns the IFRS 16 compliance obligation. The calculations, the journals, the disclosures, and the audit deliverables are all finance's responsibility. But finance cannot meet that obligation without accurate, timely data from the property team. The practical answer is that IFRS 16 compliance is jointly enabled: finance owns the output, property owns the inputs. This distinction is important because it defines accountability. Finance cannot blame property for a compliance failure, but property cannot ignore their responsibility to maintain complete and current lease records. In most organisations, the finance team should set clear expectations about what data they need from property, in what format, and by when. Ideally this is formalised in a documented process rather than relying on informal arrangements that break down when people change roles.
How do finance and property teams collaborate on lease accounting?
Effective finance-property collaboration on lease accounting requires three things: shared data, defined handoff processes, and a common system both teams actually use. The most common failure mode is two teams maintaining separate records (property in a spreadsheet or property management system, finance in an ERP or dedicated accounting tool) and reconciling them manually each month-end. This creates duplication, introduces errors at every data entry point, and means that any change has to be communicated, re-entered, and reconciled before it flows through to the accounting. A better model is a single platform where property records lease events and finance sees those events reflected automatically in the accounting. When property updates a rent review outcome, finance's calculation updates. When finance runs month-end journals, they reflect the current commercial reality of the lease. See our detailed guide on how property managers can align lease data with finance for a practical breakdown of what this looks like in practice.
What causes lease data discrepancies between property and finance systems?
The most common causes of lease data discrepancies between property and finance are dual data entry, delayed communication of lease events, and inconsistent definitions of the same lease term. When property and finance maintain separate systems, the same lease gets entered twice: by two different people, with two different interpretations, and two opportunities for error. When a rent review is agreed in April but finance is not informed until June, two months of journals have been posted with the wrong payment figure. When property calls a change a "rent review" and finance calls it a "lease modification," the two teams may be describing the same commercial event with different accounting consequences. All three failure modes are preventable with a single shared platform and clear protocols. Our post on why lease accounting is now a data management problem explores this in detail.
How often should property teams provide lease updates to finance?
Property teams should notify finance of any lease change within five business days of the event, not at month-end, not at year-end, and not when they remember to send an email. IFRS 16 requires remeasurements to occur from the effective date of a modification, not from the date finance found out about it. A late notification doesn't just delay the accounting entry: it means every journal posted between the effective date and the notification date is wrong. Practically, this means property teams need a defined protocol for what counts as a reportable event, a clear channel for communicating those events to finance, and a system that timestamps when the notification was made. Finance should set these expectations explicitly and ideally formalise them in a shared SLA or workflow tool.
Should IFRS 16 software sit in finance or property systems?
IFRS 16 calculations require a dedicated lease accounting platform. Neither a general ERP module nor a standalone property management system is designed to serve both teams well. ERP modules handle the journal side but lack the lease lifecycle management features property teams need: milestone alerts, rent review tracking, option management, and portfolio-level visibility. Property management systems handle the commercial record but lack the accounting engine finance needs: ROU calculations, amortisation schedules, IBR management, and GL integration. The right architecture is a unified lease platform that sits above both, serves both teams from a single source of truth, and connects directly to the ERP for journal posting. Our comparison of lease accounting software versus ERP modules goes deeper on this question.
How does lease accounting software bridge finance and property workflows?
Good lease software lets property enter commercial data once and finance see the accounting implications automatically, without manual handoffs or duplicate entry. The key features that make this possible are: workflow approvals so that property changes require finance sign-off before affecting calculations; milestone alerts so property is reminded of rent reviews and option windows before they pass; a shared audit trail so both teams see the same history of every lease event; automated ROU asset and liability calculations that update when lease data changes; and direct GL integration so journals post to the ERP without manual intervention. When these features work together, the gap between the commercial record and the accounting record closes. Month-end becomes a process, not a rescue operation.
What does a good finance-property handover process look like?
A good handover process is documented, system-supported, and leaves nothing to memory or goodwill. Property owns the commercial record: commencement dates, payment schedules, rent review outcomes, and option decisions. Finance owns the accounting treatment: IBR selection, lease classification, journal entries, and disclosures. Both teams work in the same platform. When property records a modification, it enters an approval workflow before it affects any GL entries. The finance team reviews, approves, and the system calculates. No emails, no spreadsheet handoffs, no reconciliation at month-end to find what got missed. The handover is built into the process, not bolted on as an afterthought. This is particularly important when staff change roles: the protocol lives in the system, not in one person's head.
How does LOIS support both finance and property users?
LOIS is a unified lease accounting and management platform built to serve finance and property teams from a single source of truth. For finance, LOIS automates IFRS 16 and AASB 16 calculations, maintains a full audit trail for every lease modification, produces reconciled GL journals, and generates audit-ready reporting packs and disclosure schedules. For property, LOIS provides automatic reminders for rent reviews, expiry dates, and option exercise windows; portfolio timelines and milestone tracking; and workflow approvals that connect property decisions directly to finance accounting. Both teams work in the same system. No duplication, no data silos, no manual handoffs. You can explore the LOIS lease accounting and property management modules, or learn about the LOIS managed service for organisations that want expert-led delivery alongside the platform.
How can property teams support the financial audit process?
Property teams support the audit by maintaining signed lease documents centrally, documenting option-term assessments and the rationale behind them, providing accurate modification effective dates, and confirming that the lease register reflects every lease currently in the portfolio. When auditors arrive, the questions they ask about leases almost always lead back to commercial facts that the property team holds. A property team that can respond to those questions quickly and accurately, with documents to back them up, reduces audit time and eliminates the risk of findings that require restatement. The single most effective thing a property team can do is ensure the lease register is complete and current before audit fieldwork begins, not during it.
For a comprehensive guide to what auditors look for and how to prepare both teams, see our IFRS 16 lease accounting audit preparation checklist, which covers the full audit readiness process in detail.
LOIS Lease Accounting: automate IFRS 16 and AASB 16 calculations with full audit trail and GL integration
LOIS Property Management: milestone alerts, portfolio timelines, and workflow approvals for property teams
LOIS Managed Service: expert-led monthly delivery combining platform automation with CA-qualified lease accounting specialists
IFRS 16 audit preparation checklist: a complete guide to what auditors look for and how to build an audit-ready lease register
How property managers can align lease data with finance: a practical guide to eliminating data silos between teams
Where ERP meets PMS: why lease accounting is now a data management problem
What is IFRS 16 / AASB 16?: the complete guide for finance teams
LOIS is the only lease platform purpose-built to unify finance and property in a single system. Finance gets automated IFRS 16 compliance and audit-ready reporting. Property gets milestone management, portfolio visibility, and a direct workflow connection to the accounting team. Both teams work from one source of truth.
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