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:
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:
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 aligning finance and property lease data.
What causes lease data discrepancies between property and finance systems?
Discrepancies between property and finance systems almost always trace back to the same root causes: manual data entry at multiple handoff points, no single source of truth, and a communication process that relies on email or spreadsheets. The specific triggers include:
Each of these is a process failure, not a technology failure. But the right technology eliminates most of them by removing duplicate data entry and enforcing a single agreed record. See our post on why lease accounting is now a data management problem for more on this dynamic.
How often should property teams provide lease updates to finance?
Property teams should communicate lease changes to finance as soon as they are agreed, not at a fixed monthly cadence. IFRS 16 requires remeasurement from the effective date of a modification, not from whenever finance happened to find out. A rent review agreed on the 5th of the month needs to be reflected in that month's journals, not next month's. In practice, most organisations establish a soft monthly cutoff: changes communicated by a set date (for example, the 20th of the month) are included in that month's close; anything after falls to the next period. The important thing is that the process is documented, both teams understand it, and the property team treats lease changes as time-sensitive accounting events rather than administrative tasks that can wait.
Should IFRS 16 software sit in finance or property systems?
IFRS 16 software should sit in a dedicated lease platform that serves both finance and property, not inside either team's existing system. The problem with housing it in the ERP is that property teams do not use the ERP, so data still has to be manually transferred across. The problem with housing it in the property management system is that it was designed for lease administration, not accounting, and typically cannot produce IFRS 16 journals, schedules, and disclosures to audit standard. A dedicated lease platform bridges both. Finance gets compliant calculations, audit trails, and GL integration. Property gets lease event management, reminders, and a single place to record what is happening in the portfolio. Both teams work in the same system without needing to understand each other's technical domain. Our post on lease accounting software vs ERP modules goes into the trade-offs in detail.
How does lease accounting software bridge finance and property workflows?
Good lease accounting software removes the handoff problem by making property data and finance calculations live in the same record. When a property manager updates a lease, the accounting consequences flow automatically. When finance runs calculations, they draw on live property data rather than a spreadsheet that was last updated three weeks ago. The key capabilities that enable this are:
What does a good finance-property handover process look like?
A good handover process is structured, documented, and does not rely on individuals remembering to send an email. At a minimum, it should include: a defined list of what data property is responsible for and what finance needs from it; a clear timeline (when changes must be communicated for inclusion in the current month's close); a nominated contact in each team who is responsible for the handover; and a record of what was communicated, when, and what action finance took. In practice, the most effective handover processes are embedded in the lease platform itself: property records the change, the system notifies finance, finance reviews and processes it, and both teams can see the status at any point. The goal is to replace an informal, email-based process with something that generates a reliable audit trail automatically.
How does LOIS support both finance and property users?
LOIS is built as a unified platform for both finance and property, with each team accessing the same underlying lease data through tools designed for their specific responsibilities. For finance, LOIS automates IFRS 16 and AASB 16 calculations, produces amortisation and depreciation schedules, generates audit-ready journals with full GL reconciliation, and maintains a complete audit trail for every modification. For property, LOIS provides automatic reminders for rent reviews, option exercise deadlines, and expiry dates, along with portfolio timelines, cost comparisons, and approval workflows. Because both teams work in the same system, there is no manual data transfer, no reconciliation between separate records, and no version control problem. When property records a lease event, finance sees it. When finance runs month-end, it reflects the current state of the portfolio.
Explore the LOIS Lease Accounting and LOIS Property Management features in more detail, or learn how our Managed Service can take on the full compliance workload for your team.
How can property teams support the financial audit process?
Property teams support the audit by providing auditors with accurate, complete, and well-documented lease records that match the figures finance has recognised in the financial statements. In practice this means: being able to produce the original lease agreement and any subsequent amendments on request; providing a clear record of when rent reviews were agreed and at what amount; documenting the basis for any option exercise decisions (or decisions not to exercise); and confirming the current state of any make-good obligations. When property data is well-maintained throughout the year, audit support is straightforward. When it is not, auditors find gaps between the commercial reality and the accounting records, and the conversation becomes difficult quickly. For a comprehensive audit preparation checklist covering both finance and property responsibilities, see our IFRS 16 audit preparation checklist.
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