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IFRS 16 Leases provides a recognition exemption whereby lessees can choose not to capitalise 'short-term leases' on the balance sheet, and instead recognise lease payments as an expense, either on a straight-line basis, or another systematic basis, if that basis is more representative of the pattern of the lessee's

Perhaps the most significant difference between the GAAP and IFRS lease standards is the definition of a lease. While the IFRS standard considers all leases as financial leases, the FASB/U.S. GAAP standard differentiates between an operating lease and a finance lease.

The main difference between IFRS 16 and ASC 842 is the differentiation of operating and finance leases for the lessee which is still required under US GAAP and which affects subsequent measurement.

IFRS 16 is the most significant change to lease accounting in over 30 years.The objective is to ensure that companies report information for all of their leased assets in a standardised way and bring transparency on companies' lease assets and liabilities.

In particular, lessees no longer classify their leases between operating and finance under IFRS, but will continue to do so under US GAAP.Therefore, from an income statement perspective, the IFRS model treats all leases as a financing arrangement.

IFRS 16 applies only to leases, or lease components of a contract. IFRS 16 changes significantly how a company accounts for leases that were off balance sheet applying IAS 17, other than short-term leases (leases of 12 months or less) and leases of low-value assets (such as personal computers and office furniture).

There are no differences between operating leases under IFRS 16 and ASC 842. Lease payments are recognized as lease income on a straight-line basis over the lease term unless another systematic basis is more representative of the pattern in which benefit is expected to be derived from the use of the underlying asset.