What are the typical disclosures required for leases in real estate audits under IFRS 16 or ASC 842?

• A. For lessees: ROU asset, lease liability, lease term, and lease expense; for lessors: lease income, residual assets, and terms; required disclosures on variable payments and options.
• B. No disclosures required for leases under the standards
• C. For lessees: ROU asset and lease liability only; for lessors: lease income only
• D. Only asset and liability

Answer: (D)

Disclosures for leases under IFRS 16 and ASC 842 cover much more than simply recognizing an asset and a liability. Auditors look for information that explains the scope, timing, and uncertainty of lease payments, as well as how the lease affects the financial statements over time.

For lessees, the disclosures include the amounts recognized for the right-of-use asset and the lease liability, but also require a maturity analysis showing the future cash flows and when they’re due, a reconciliation of changes in the lease liability, and the discount rate used. There’s typically information about the components of lease cost, such as depreciation of the right-of-use asset and interest on the lease liability (and how those are presented in the income statement), plus policy disclosures for short-term or low-value leases and for variable lease payments, options to extend or terminate, and any significant judgments or practical expedients used. The aim is to reveal the nature and amount of lease commitments and how they impact the financial position and performance.

For lessors, disclosures cover lease income by lease type, any residual value guarantees, a schedule of undiscounted lease payments, and significant leasing arrangements that could affect liquidity or risk, along with other qualitative and quantitative disclosures required by the standards.

In short, the typical disclosures are broad and ongoing, addressing the amounts, timing, and uncertainties of lease payments and the financial statement effects, not just the asset and liability figures.