《國際財務報告準則》第16號，租賃和其他財務報告事項 (IFRS 16, Leases and other financial reporting matters)

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Welcome to Deloitte Financial Reporting updates, our webcast series cover issues and developments
related to the various accounting frameworks. Today’s presentation is: “Bringing Clarity
to an IFRS World. IFRS 16: Leases and another financial reporting matters”. I’m Jon
Kligman, your host for this webcast, and I’m joined by others from advisory and national
accounting groups. Just a couple of housekeeping items before I tell you about our agenda and
speakers. If you would like a copy of the slides for reference, they are available for
download on the same webpage on which you accessed this update. You can also direct
your colleagues to the webcast link by referring them to Deloitte Canada’s Center for Financial
Reporting, which is accessible at iasplus.com, simply select Canada-English from the dropdown
menu at the top right of the webpage. Okay, let’s get to our agenda. First you
will hear from Nomita Dan and Martin Roy who will provide us with an overview of IFRS 16,
the new lease’s standards including the revised definition of a lease, the impact
on lessee accounting and transition considerations. After Nomita and Martin, Kerry Danyluk will
provide an update on IFRS amendments effective this year, IFRS interpretations committee
decisions to consider and an update on securities matters. Our comments on this webcast represent
our own personal views and don’t constitute official interpretive accounting guidance
from Deloitte. Before taking any action on any of these issues, it’s always a good
idea to check with a qualified advisor. No professional development certificates will
be issued for attending the webcast; we encourage you to check with your provincial institutes
(or ordre) regarding the continuing professional development credits.
I’d now like to welcome our first two speakers, Nomita Dan and Martin Roy. Nomita is a senior
manager in Deloitte’s Toronto Advisory Practice with over 15 years of public accounting experience.
Nomita assists clients with understanding, interpreting and applying accounting guidance
related to a variety of specialized areas including leasing, securitizations and consolidation.
Martin Roy is a partner in our Advisory Services Group, he has an over 24 years of experience
in accounting and financial reporting. Martin specializes in accounting for leases, consolidation,
structured entities, joint arrangements, securitizations and financial instruments under IFRS, US GAAP
and ASPE. So over to you Nomita. Thank you, Jon, and hello everyone! Before
we get into the details of IFRS 16, I thought we would take a look at some of the drivers
leading to this change in lease accounting as we know it. The current model, the current
IAS 17 model, requires lessees to classify leases as either an operating lease or a finance
lease. Where, as we know, a lease asset and lease liability are recognized on a lessee’s
balance sheet for a finance lease. However, an operating lease is not reported on lessee’s
balance sheet. Instead, it is effectively an off-balance-sheet lease, and accounted
for similar to (how) a service contract would be, with a lessee recognizing a straight-line
lease expense over the lease term. Many, including investors, the SEC, and others have expressed
concerns about the lack of transparency of information about these obligations that are
operating leases. The absence of information on the balance sheet has meant that analysts
and other financial statement users often have to make adjustments to better reflect
an entity’s leverage as well as to be able to make comparisons between entities that
purchase or have finance leases versus entities that primarily utilize operating leases as
a strategy. As well, the differentiation between the finance leases and the operating leases
has been criticized as resulting in economically similar transactions being accounted for differently.
As a result of all these factors, the IASB and the FASB set out to improve the accounting
for leases. As part of the lease’s project, the IASB performs an analysis, looking at
a sample of listed companies using IFRS or US GAAP. The next slide provides the sense
of the magnitude of these off-balance-sheet leases and the industries expected to be most
impacted by the new standard. Based on the analysis performed by the IASB,
the amount of leases currently off-balance-sheet is significant, 14,000 companies reported
an estimated $2.18 trillion US dollars in off-balance-sheet lease payments on a discounted
basis, of which 1,022 companies sampled by the IASB accounted for 1.6 trillion of this
2.18 trillion. No surprise, the highest proportion of off-balance-sheet leases are in North America,
with the next highest region being Europe followed by Asia-Pacific, Latin America and
finally Africa and the Middle East. As we can see by the pie-chart by sector, the industries
expected to be most impacted by the new standard are airlines, retailers, travel and leisure
and transport. Now let’s delve into the new model under IFRS 16, the first step to
this being identifying whether or not a contract is or contains a lease.
So, under IFRS 16, at the inception of a contract, an entity assesses whether the contract is
or contains a lease. With the inception date being the earlier of the date of the leased
agreement and the date of commitment by the parties to the principal terms of the conditions
of the lease. Subsequent to inception, an entity reassesses whether a contract is or
contains a lease only if the terms and conditions of the contract are changed. Under the new
standard, a contract is or contains a lease if the contract provides the customer with
the right to control the use of a specified asset for a period of time in exchange for
consideration. What is control under that new model? Well,
control exists if the lessee has both the right to obtain substantially all of the economic
benefits from the use of an identified asset, and the right to direct the use of that asset.
While the definition has changed somewhat from IAS 17, it is not expected to affect
the vast majority of contracts applying lease accounting. That being, leases currently accounted
for under IAS 17 are generally expected to be leases under IFRS 16. The next slide depicts
the decision tree that an entity may follow to identify whether a lease exists in a contract.
This slide lays out the steps that an entity would follow to identify whether you have
a lease or not in a contract. The first step is: Is there an identified asset? If the answer
to this question is “No”, then the contract is not a lease. However, if the answer is
“Yes”, then the next question is: Does the customer have the right to obtain substantially
all of the economic benefits of the asset throughout the period of use? If this is not
the case, then the customer does not obtain substantially all of the economic benefits
of the asset; then the contract would not be considered a lease. However, if the answer
is “Yes”, and the customer does in fact obtain substantially all of the economic benefits
throughout the period of use, then the next question becomes, are the relevant decisions
about how and for what purpose the asset is used predetermined? If the answer is “Yes”,
the “how and for what purpose the asset used is predetermined”, then if the customer
can operate the asset without the supplier having the right to change the operating instructions,
or the customer has designed the asset so that the “how and for what purpose the asset
is used” is predetermined, then a lease would be considered to exist. If the answer
is “no”, and the how and for what purpose the asset is used has not been predetermined,
then the question becomes, does the customer have the right to direct “how and for what
purpose the asset is used” throughout the period of use? If the customer has the ability,
to the right to direct “how and for what purpose the asset is used” throughout the
period of use, then the lease would be considered to exist. In the next couple of slides, we
will explore these concepts of “identified assets”, “substantially all of the economic
benefits” and “the right to direct use of the asset” in more detail using an example.
Here are the facts to our example, Customer enters into a contract with Supplier for the
use of a specified ship for a five-year period. The ship is explicitly specified in the contract,
and Supplier does not have substitution. Customer decides: what cargo will be transported; and
whether, when and to which port the ship will sail throughout the five-year period of use,
subject to restrictions specified in the contract. Those restrictions prevent Customer from sailing
the ship into waters that are high risk of piracy or carrying hazardous materials as
cargo. Supplier operates and maintains the ship, and is responsible for the safe passage
of the cargo on board the ship. Customer is prohibited from hiring another operator for
the ship of the contract, or operating the ship itself during the term of the contract.
We will now discuss the concepts of “identified assets”, “substantially all of the economic
benefits”, and “the right to direct the use of the asset” in more detail in the
next slide using this example. So going back to the definition of a lease,
a lease under the new standard is a contract that provides a customer with the right to
control the use of an identified asset for a period of time in exchange for consideration.
Control exists if the customer has both the right to obtain substantially all of the economic
benefits from the use of the identified asset, and the right to direct the use of that asset.
The first concept is the use of an identified asset. An asset is typically identified if
it is explicitly specified in the contract or implicitly specified at the time the asset
is made available for use by the customer. If the supplier has substantive rights to
substitute the asset throughout the period of use, then the asset is not considered to
be identified. A supplier’s right to substitute an asset is substantive only if the supplier
has the practical ability to substitute alternative assets throughout the period of use, and the
supplier would benefit economically from the exercise of its right to substitute the asset.
In our ship example, the ship is explicitly specified in the contract, and the supplier
does not have the right to substitute the ship. Therefore, it meets this condition and
is a specified asset. Some other examples of identified assets include capacity portions
if they are physically distinct. For example, a floor of a building; however, capacity portion
that is not physically distinct, for example, a capacity portion of a fiber optic cable,
would not be considered an identified asset, unless it (represents) substantially all the
capacity such that the customer obtains substantially all of the economic benefits.
The second concept is the right to obtain economic benefits from the use of the identified
asset. The economic benefits from the use of an asset include its primary output and
its by-products, and other economic benefits from using the asset that would be realized
from a commercial transaction with a third party. Going back to our example, in our ship
example, the customer has the right to obtain substantially all of the economic benefits
from the use of the ship during the contract period through its exclusive use of the ship
during this period. Therefore, the customer would meet the second condition and has a
right to obtain the economic benefits. It should be noted that the assessment of economic
benefits is made within the boundaries of the scope of the contract. What does this
mean? Well, for example, in a vehicle lease that has a limit for mileage use of 25,000
km, that limit is within the scope of the contract, and so the vehicle lessee would
assess whether it has the right to obtain the benefits of the use of the vehicle within
this mileage limit of 25,000 km. For example: Can they drive all 25,000 km of the vehicle?
Can they drive 20,000 km of the vehicle? The important thing to know with this concept
is that a limit does not mean that a lessee does not have the right to obtain substantially
all of the economic benefits of the identified asset.
The third and last concept is: Does the customer have the right to direct the use of the identified
asset? A customer has the right to direct the use of an identified asset throughout
the period of use only if either: 1) the customer has the right to direct how
and for what purpose the asset is used throughout the period of use; or
2) the relevant decisions about how and for what purpose the asset is used are predetermined,
and the customer has the right to operate the asset throughout the period of use, or
the customer has designed the asset in a way that it predetermines how and for what purpose
the asset will be used. The relevant decision rights that are considered
are those that effect the economic benefits to be derived from the assets. For example,
rights to change the type of output produced by the asset, rights to change when the output
is produced, and rights to change where the output is produced. On the other hand, rights
that are limited to maintaining operating the asset do not grant on its own the right
to direct how and for what purpose the asset is used. In our ship example, the customer
has the right to direct activities related to the use of the ship, because it decides
where and when the ship will travel, what cargo it will carry or whether it will be
transporting cargo at any given time. While there are contractual restrictions about where
the ship can sail and the nature of the cargo to be transported, these are protective rights,
and do not prevent the customer from having the right to direct the use of the asset.
Therefore, in the example, the customer has the right to control the use of the ship throughout
the five year contract period, and this would be considered a lease. Now, let’s move on
to the accounting starting with the accounting for the lessee on the next slide.
In a nutshell, this slide illustrates the impact to a lessee’s balance sheet and income
statement under IAS 17, the old standard, versus IFRS 16, the new standard. On the balance
sheet for Lessee, the big change is that most of the leases will now come on balance sheet.
A lessee will recognize leased assets, which are now called the right of use assets, and
the related lease liabilities on their balance sheet. Lessees will either present in the
balance sheet, or disclose in the notes, right of use assets separately from other assets.
If a lessee does not present the right of use assets separately, the lessee can include
the right of use assets within the same line item as that which it would have if the underlying
asset were owned, and disclose which line item on the balance sheet it has included
those right of use assets. Similarly, lease liabilities are to be presented separately
from other liabilities. Again if the lessee does not present lease liabilities separately
on the balance sheet, then the lessee discloses which line items include those liabilities.
Right of Use assets that make the definition of investment property will be presented in
the balance sheet as investment property. On the income statement, straight-line operating
lease expense will be replaced by depreciation on the right of use assets and interest expense
on the lease liability. Depreciation and interest expense are presented separately on the income
statement, where interest expense on the lease liability, is a component of finance costs
in accordance with the IAS 1, and required to be presented separately. Interestingly,
this would result in an increase in EBITDA, Earnings before Interest, Tax, Depreciation
and Amortization, under the new standard versus the old. We will talk a little bit more about
the impacts on the next slide. As balance sheets grow with the recognition
of these right of use assets and related lease liabilities, this is going to impact gearing
and leverage ratios on the balance sheet. The recognition of the depreciation on the
right of use assets and interest expense on the lease liabilities will result in a front
loading of expense over time versus straight line payments under the old model. However,
the total lease expense over the life of the lease is the same. We have to remember what’s
different is the pattern of recognition of this expense over time. As previously mentioned,
EBITDA would increase given that we now have depreciation and interest expense under the
new standard versus the straight-line lease expense, which is typically included in operating
expenses under the old standard. On the cash flow statement, a lessee classifies
cash payments for the principal portion of the lease liability within financing activities.
Cash payments for the interest portion of the lease liability are presented as either
finance or operating depending on the entity’s accounting policy choice. And short-term lease
payments, payments with leases of low value assets and variable lease payments that may
not be included in the measurement of the lease liability, would be presented within
operating activities. This would be expected to result in an increase in operating cash
inflows and an increase in financing cash outflows. However, remember total cash flows
still remain the same. With all this change for lessees, let’s move on to the next slide
to talk about some of the practical expedients that are available for lessees.
The new standard provides two practical expedients for lessees. The first one relates to portfolios
where these portfolios with similar risk characteristics may be accounted for on a portfolio basis
using estimates and assumptions for the portfolio as a whole if it is not expected to result
in materially different accounting. If accounting for a portfolio, an entity would uses the
estimates and assumptions that reflect the size and composition of portfolio as a whole,
this practical expedient would be expected to apply/ likely to apply to leases for items
such as vehicles which may be all part of a master agreement. The second practical expedient
relates to the separation of lease versus non-lease components within a contract. Under
the new standard, for a contract that contains a lease component, and additional lease and
non-lease components. For example, the lease of an asset, and the provision of maintenance
services under the same contract, a lessee would be required to allocate the consideration
payable on the basis of the relative standalone prices of each of these components and to
account for the leased component separately from the non-leased component. A lessee recognizes
the lease component of a contract on balance sheet and payments with respective things
such as maintenance would be expensed as occurred. This allocation may require significant judgment/estimate.
Therefore, as a practical expedient, a lessee may elect by class of underlying asset not
to separate non-leased components from leased components and instead account all of the
components within the contract as a lease. Thereby, removing the need for un-bundling
exercise but increasing the liability that the lessee would recognize on balance sheet.
Now, we will pass it on to Martin, who will talk about the measurement aspects of the
lessee accounting and some of the exemptions under the new standards.
Great, thanks Nomita. So, I’m now going to talk about the nuts
and bolts of the accounting model for lessees. At the commencement date of the lease, the
lessee shall recognize a right of use asset and a lease liability. I’ll start with the
lease liability. It’s initially measured at the present value of lease payments that
are not paid at that date, discounted using the interest rate implicit in the lease. If
the implicit rates in the lease cannot be reliably determinable by the lessee, as sometimes
may be the case, the lessee should use its incremental borrowing rate, just like it currently
does under IAS 17. We will look at the components of lease payments on the next slide and the
definition of the lease term immediately after that. Subsequent to the initial recognition,
a lessee will increase the lease liability to reflect the interest accrued, which is
recognized in profit and loss, using the effective interest method. It will also deduct the lease
payments made from the liability and would re-measure the carrying amount to reflect
any re-assessment, lease modifications or revisions to the lease payments. As for the
right of use asset, it’s initially measured at the amount of the lease liability plus
initial direct costs. The balance is adjusted for lease incentives, payments at or prior
to commencement and restoration obligations determined in accordance with IAS 37 - Provisions
Contingent Liabilities and Contingent Assets. Subsequently, the right of use asset is measured
at cost less depreciation and impairment, unless it’s investment property that is
fair valued or belongs to a class of PP&E that is revalued. And lastly, it is tested
for impairment under IAS 36 - Impairment of Assets. Let’s talk more specifically about
the lease payments on the next slide. When thinking about the lease payment for
the purpose of calculating a lessee’s lease liability and right of use asset, the lease
payments are measured as the total of fixed payments, variable payments based on an index
or rate, amounts that it is probable a lessee will owe under a residual value guarantee,
and lastly payments related to purchase and termination options that the lessee is reasonably
certain to exercise. So let’s talk about each of these types of payments in a little
bit more detail. Fixed payments are payments that are specified
in the lease agreement and fixed over the lease term. Fixed payments also include variable
lease payments that are considered in substance fixed payments; for example, a variable payment
that includes a floor or minimum amount. One thing to keep in mind, however, regarding
in-substance lease payments is that even if a variable lease payment is virtually certain,
for example a variable payment if a lease(e of) a retail store meets a nominal sales volume,
such a payment would not be considered an in-substance fixed payments under the guidance.
So if you have a virtually certain lease payment, you would still exclude that amount from the
total lease payments for the purposes of calculating the lease liability and ROU asset.
Moving on to variable lease payments. An entity would also include, in the lease payments
to be discounted, any variable payment that depend on an index or a rate. In contrast,
however, one would not include those variable lease payments that are based on usage or
performance of the asset. So for example, a lease payment that varies based on the sales
level of a particular retail store would be excluded. For these types of variable lease
payments, a lessee would recognize them as an expense as incurred, which Nomita alluded
to a little earlier. As for residual value guarantees, one would include, in lease payments,
any amounts that it is probable will be owed under the residual value guarantee by the
lessee. One thing to note relating to residual value guarantee amounts, the enhanced disclosure
requirements in IFRS 16 include reasons for providing residual value guarantees, the magnitude
of the exposure, the nature of the underlying assets, and other operational and financial
effects. And the last item to include in the lease payments are the effects of exercising
a purchase or termination option, meaning if it is reasonably certain that the lessee
will exercise a purchase option, on an underlying asset, then the lease payments would include
the exercise price of the purchase of the underlying asset. If it is reasonably certain
that the lessee will exercise a termination option, then any fees or penalties associated
with terminating the lease would be included in the lease payments. Let’s move on to
the lease term on the following slide. Needless to say, the longer the lease term
is, and for that matter the larger the lease payments are, the bigger the lease liability
will be at initial recognition. In determining the lease term and assessing the length of
the non-cancellable period of a lease, an entity shall apply the definition of a contract
and determine the period for which the contract is enforceable. A lease is no longer enforceable
when the lessee and the lessor each has the right to terminate the lease without the permission
from the other party with no more than an insignificant penalty. By definition, the
lease term is the non-cancellable period of the contract, plus renewal options that are
reasonably certain to be exercised by a lessee, and termination options that are reasonably
certain not to be exercised by a lessee. The key in this determination is of course the
definition of “reasonable certainty”. While it continues to be based on the existence
of an economic incentive which would compel the lessee to exercise the option when it
comes up, as is the case under IAS 17, the difference being that unlike in IAS 17, IFRS
16 contains interpretive guidance to help in understanding this notion. In accordance
with the standard when assessing the likelihood of exercising an option, one must consider
all relevant facts and circumstances that create an economic incentive for the lessee
to exercise or not to exercise the option. Examples of factors to consider include contract
based factors. For example, a contract may include an option to extend or terminate a
lease that may be combined with one or more other contractual features so that the lessee
guarantees the lessor a minimum or fixed cash return that’s substantially the same regardless
of whether the option is exercised. There could be asset based factors, for example,
where the lessee has installed significant lease improvements that would still have economic
value when the option becomes exercisable. There may be entity specific factors, and
these are probably new in the way we think about exercising an option, or reasonable
certainty for exercising options under IAS 17. So, for example, the importance of the
underlying asset to the lessee’s operations, where one should consider if the asset is
specialized in nature, the location of the asset, and the availability of suitable alternatives,
as well as (here’s the kicker) a history of exercising renewal options in the past.
And finally, market based factors, so for example, they may include an assessment of
current market rentals for comparable assets. As for the re-assessment of the lease term
is required when, for example, a significant event or change in circumstances occurs that
is in the control of the lessee, a contract term requires the lessee to exercise or not
to exercise a renewal or termination option, respectively, the lessee elects to exercise
or not to exercise a renewal or termination option that was not previously deemed to be
reasonably certain of being or not being exercised. Let’s move on to the exceptions to the ROU,
Right of Use asset, accounting model that exists under IFRS 16. A lessee may elect to
apply certain recognition exemptions to: 1) short-term leases; and 2) leases for which
the underlying asset is of low value. If such recognition exemptions are applied, then the
lease payments associated with those leases are recognized as an expense on either a straight
line basis over the lease term or another systematic basis if that basis is more representative
of the pattern of the lessee’s benefit. So what is a short term lease? It has a lease
term that at the commencement date of 12 months or less, and does not include a purchase option.
One thing to note, this exemption must be applied consistently for each class of underlying
leased asset. So it has to be applied to the entire class as opposed to individually for
each lease contract in that class. What is meant by “low value assets”? You might
ask. The notion is applied in absolute terms rather than by reference to the size of the
reporting entity. The basis for conclusion actually mentions a number which is assets
with a new value of less than US$5,000. It only applies to leased asset that are not
highly dependent or highly inter-related with other assets. The exception is applied on
a lease-by-lease basis, so unlike short-term leases. Examples expected to qualify include
office furniture, phones, personal computers and tablets. But inversely, the standard notes
that vehicles are not expected to qualify for low-value asset exemption.
On to lessor accounting, you will see on the following slide that the good news is that
the accounting for lessor remains largely the same as compared to IAS 17. That is, lessors
will continue to need to classify leases as either operating or finance lease. The reason
for this was that the comments that the IASB and FASB received was that the model for lessors
was not broken, so it should probably not be changed as a result of the project. What
that means though is that there will no longer be symmetry between the accounting for lessors
and the accounting for lessees, meaning that if the lessor classifies a lease as an operating
lease, they will have the asset on their books. On the other side, the lessee will lease the
asset and as a result of the new model for lessee, they will have to book a right of
use asset relating to the same asset. So this means that there will be two assets booked
in different balance sheets relating to the same asset, not quite exactly the same asset
but certainly a part because the right of use asset is supposed to be the piece of the
asset that the lessee can use over the lease term as opposed to the lessor would have the
entire asset on its books. As we previously noted, while the definition
of a lease has changed from IAS 17, it’s not expected to affect the vast majority of
contracts to which lease accounting applies. So that’s kind of one of the changes that
we highlight for lessors, is the definition of lease has changed. The second thing we
highlight is Presentation and Disclosure. IFRS 16 contains additional disclosures about
a lessor’s leasing activities, in particular, exposure to residual value risks, including
assets subject to operating lease separately from the assets owned and held for other purposes,
and how the entity manages residual value risks. There are also enhanced disclosure
requirements were also added to enhance users to better estimate cash flows arising from
lessor’s activities, IFRS 16 requires the lessor to disclose the components of lease
income recognized in the reporting period to also disclose information about how it
manages its risks associated with any rights that it retains in leased assets, and also
disclosures required by IAS 16 - Property, Plants and Equipment, separately for assets
subject to operating leases, further distinguished by significant classes of underlying assets
from owned assets that are held and used by the lessor for other purposes. The third difference
I’d like to highlight is the definition of “initial direct cost”. IFRS 16 defines
them as incremental costs of obtaining a lease that would not have been incurred if the lease
had not been obtained, except for such costs incurred by manufacture or dealer lessor in
connection with the finance lease. And the last bullet that you will see there, the fourth
difference we noted was IFRS 16 provides additional guidance on sub-leases i.e. intermediate lessor
to account for the head lease and the sub-lease as two separate contracts and evaluate lease
by reference to the right of use asset arising from the head lease, and not by reference
to the underlying asset. So now that we talked about the accounting
for the lessee and the lessor, let’s focus our intention on transition. On the next slide,
you’ll note that the standard is effective for annual reporting periods beginning on
or after January 1, 2019. Earlier application is permitted as long as the entities have
also adopted IFRS 15, called Revenue from Contracts with Customers. In light of the
fact that the two standards are linked with certainly respect to the definition of control
over the asset, that’s something in the definition of the lease. Also how to allocate
the lease component versus the non-lease component that Nomita talked about before. So if you
early adopt 16, you have to have adopted IFRS 15. The good news is that there are no measurement
changes to previous finance leases required at transition. Similarly, there is no need
to re-assess whether on the date of initial application contracts are or contain leases.
Your previous conclusion in this regard under IFRIC 4 remain unchanged at initial adoption.
As for operating leases outstanding at the date of initial application, a lessee shall
apply IFRS 16 to its leases either on a full retrospective basis to each prior reporting
period presented, applying the concepts in IAS 8 - Accounting Policies Changes and Accounting
Estimates and Errors, which implies re-statement of the comparative year balances, or you can
choose to do it on a modified retrospective basis with the cumulative effect of initially
applying the standard, recognized at the date of initial application, meaning that there
is no restatement required under this approach for the prior comparative period. And the
entity must apply the election consistently to all its operating leases in which it is
the lessee. Choosing the full retrospective approach under IAS 8 will potentially be more
involved and costly to the organization, but will obviously provide more comparability
to the financial statements. In contrast, if the modified retrospective approach is
applied, although it is simpler and there is no need to restate the comparative period,
you will lose on comparability, possibly burden future years with more lease related expenses
than would otherwise have been required, and additional disclosure requirements associated
with this alternatives are required. Let’s talk a little bit more about the modified
respective approach. Under this approach, one would first calculate and recognize the
lease liability as the present value of the remaining lease payments at the date of initial
application, presumably January 1, 2019, discounted using the lessee’s incremental borrowing
rate at that date. As for the right of use asset, there is a choice. It is measured at
either the carrying amount as if IFRS 16 had been applied since the commencement date of
the lease at the lessee’s incremental borrowing rate at the date of initial application, or
an amount equal to the lease liability adjusted by any prepaid or accrued lease payments.
So in comparing the two options to determine the right of use of asset balance, the carrying
amount option would require historical data, which may be cumbersome to obtain. Under the
other option, essentially making the right of use asset balance equal to the lease liability
balance, there would be no retained earnings impact, and it could potentially be more cost
effective. However, under this alternative, the initial right of use of asset balance
will more likely be larger than it otherwise would have been, resulting in a drag on earnings
going forward. So if one chooses the modified retrospective approach to initially adopt
the standard, the standard also contemplates some additional practical expedients to facilitate
the application of that methodology. So in addition to the portfolio low-value asset
and short-term lease expedients previously discussed, a lessee may use one or more of
the following practical expedients, assuming that they are applying the modified retrospective
approach to operating leases previously classified under IAS 17. The practical expedient can
be applied on a lease-by-lease basis and they are indicated on that slide. For example,
a lessee may rely on its assessment of whether leases are onerous, applying IAS 37 - Provisions,
Contingent Liabilities and Contingent Assets, immediately before the date of initial application
as an alternative to performing an impairment review of its right of use asset that will
initially be recognized. If the lessee chooses this practical expedient, the lessee shall
adjust the right of use asset at the date of initial application by the amount of any
provision for onerous leases recognized in a statement of financial position immediately
before the date of initial application. Another example is that the lessee may exclude initial
direct costs from the measurement of the right of use asset at the date of initial application.
And one other example, the lessee may use hindsight, such as in determining the lease
term if the contract contains options to expand or terminate the lease.
On the following slides, we have indicated things to keep in mind as you contemplate
the initial adoption of IFRS 16 and we have classified them in the slide in three different
categories. Financial reporting considerations, practicalities, and other considerations.
For example, when thinking about the financial reporting implications of initially adopting
the new standard, you should remember that the right of use asset leads to a higher total
lease related expense, as Nomita explained earlier, in the early years as compared to
the later ones. Consequently, this impact as well as the potential to re-measure the
right of use asset and lease liability balances over the lease term for changes in circumstances
will likely result in more volatility in the financial statements of lessees, an outcome
which is often disliked by management and analysts. Similarly, with effect to the practicalities
associated with applying the IFRS 16, we note potential data gathering and analysis concerns
as compared to the current practices. On some polling that we have done in various discussions
we had on this standard, we’ve noted that a lot of attendants have noted that their
system would likely need to be either enhanced or modified to be able to accommodate the
application of the new standard, clearly that depends on the size of your lease portfolio,
but that’s certainly something to keep in mind. You know as operating leases were accounted
for like most other expenses, the actual terms of the contracts might not currently be captured
completely and appropriately which may lead to a significant investment in time and effort
to fill that data gap. What about the systems and processes? Will yours that are in place
currently suffice, and will there be a need to enhance or possibly even replace them to
deal with the new standard? Last but not the least, have you considered the potential impact
the initial adoption of IFRS 16 on your corporation's financial performance metrics such as covenants
and key performance indicators, the determination of your annual bonus pool and similar items?
What about internal and external communications with various stakeholders like board members,
bankers, analysts just to name a few? Have you considered if this change in accounting
treatment will impact your leasing versus buying decisions? These are all things that
need to be assessed as a result of the new standard.
Last but not least, how can we talk about the adoption of a new standard without talking
about a project plan and steps to ensure a successful implementation? You will note those
on slide 27. This is what we refer to as “Next Steps” and “Steps to success”. Despite
the fact that January 1, 2019 seems far for all of us right now, depending on how many
leases your organization is a party to, looking more closely at what needs to be accomplished
by then, isn’t unfortunately that far off. As always, it’s better to plan ahead and
prepare in advance of the date of initial application, than be sorry. Clearly, you’ll
need to tailor the project plan based on the type of operations and number of leases impacted.
We have highlighted in this slide what we believe are steps to a successful plan, and
they include such things as you know, project governance, which should be started sooner
rather than later, and includes the establishment of who will be part of the transition team.
Are they representing the right people in the organization to be able to make sure that
all of the aspects of the transitions have been contemplated? We also have a group called
“Assess, Analyze and Prepare” which also talks about establishing the scope of IFRS
16 and making sure that you have a sense of what is your total population of leases, do
you have all the data that you need, and if not, how do you gather it and how do you obtain
it? And this is clearly made more difficult in the case of international locations and
such matters. The next step we talk about is the implementation, so improving the data
quality, making sure that you have everything you need to be able to write or create the
adjusting entries that will be required, depending on your methodology of transition. We then
talk about a step where you would embed all of that into your current reporting processes
to make sure that you know it’s a go live, you are comfortable with the process, you
are comfortable with your controls over them and it’s just business as usual. And finally,
the last step in our chart is to mitigate and strategize, which is to make sure that
you assess if there ever are changes to the tax requirements relating to this accounting
treatment, that you are ready to incorporate those into your controls, talk about treasury
implications, talk to analysts about what the impact will be to prepare them for the
change; you need to probably re-think about your leasing strategy, are you going to continue
to buy our lease assets, why? And what’s the reason for doing either of those things,
and low and behold we are at January 1, 2019. So that concludes my remarks on IFRS 16. So,
John, it’s back to you. Thanks a lot Martin and thank you Nomita as
well. So I guess there are more big changes headed our way. I would like now to introduce
our next speaker, Kerry Danyluk. Kerry joined Deloitte as a partner in 2006, with over 20
years of experience in public practice, standard setting and industry. Kerry is currently a
partner in Deloitte’s National Assurance/Advisory services and specializes in a variety of areas
of IFRS, ASPE and not-for-profit accounting. Over to you, Kerry.
Thanks John. Okay, as John mentioned at the beginning, I’m going to run through a couple
of things that are new for 2016 reporting, since we are well into the 2016 reporting
year for calendar year end companies, and also I’m going to touch on some recent activities
of IFRS interpretations committee and provide a little bit of an overview of the IASB work
plan and then a short securities regulatory update. So first of all, new for 2016, we
have this amendment that is highlighted on the slide related to IAS 1, presentation of
items in other comprehensive income. So, as you know, there is an existing requirement
to show other comprehensive income items segregated between those that recycle versus those that
do not. So, what do we mean when we say recycle or non-recycle? So, we say that an item that
we put in other comprehensive income that will probably eventually someday end up in
regular profit and loss, we would say that those are recycling items. And items that
do not recycle are ones that go straight into OCI and we cannot or will not expect to see
them in the regular P&L. So some examples, items that recycle: gains and losses on available
for sale investments for example; or maybe items related to cash flow hedging instruments.
So those go into OCI and then someday will come into regular P&L, so those are ones that
recycle. Items that do not recycle, there are not too many example of those, but one
example is related to employee benefits, items that go into OCI and will not go back into
the regular P&L. So what's up with this new requirement? So, we have a requirement to
segregate between recycling and non-recycling. This requirement that is new for 2016 is to
show the share. So remember that we need to show OCI items related to your equity accounted
investees, so those being your associates and your joint ventures, so those need to
be shown separately. And now they have introduced that we want those highlighted between recycling
and non-recycling as well. So this slide shows an example of how you
might do that. And this is certainly not the only way to do it but it is an example and
it is based on what they actually presented in the standard as an example. So that is
required for 2016, so hopefully people have been doing that for their first quarter. It
would be required in the quarterly reporting, new for 2016.
So the next item we are going to touch on is actually an area where I don’t know personally
I’m having a little bit of trouble trying to keep up here. We have a myriad of amendments
and inquiries regarding changes in ownership interests of all different sorts: associates,
joint control, control. What do we do in some of these situations where maybe these existing
standards are not overly clear? So, one thing we do have in the standards that’s new for
2016 and its right in the standards, and you will find it in IFRS 11 paragraph 21A. It’s
answering the question: what do we do when we acquire an interest in a joint operation?
So this is both a new interest, so buying in for the first time into a joint operation
as well as adding to an interest that you already have. So why is this unclear? Well,
remember a joint operation is we’re we are doing that special accounting where we are
accounting for the assets and liabilities, the venture, the joint arranger’s share
of assets and liabilities. We are not doing equity accounting, which would be what we
would do for a joint venture where maybe there is more clarity (with) what we do when we
first buy an equity interest in a joint venture. So, here, it was thought that there was not
enough clarity, so they have introduced this paragraph 21A that basically points you to
the requirements of IFRS 3 and says, look follow IFRS 3 when you are buying into a joint
operation or increasing your interest in a joint operation, as long as that joint operation
meets the definition of a business. So what does that mean? It means we would have a purchase
price allocation, there could be goodwill, transaction costs would be expensed, all the
consistency with IFRS 3. So that has now been clarified. There are a number of other areas
that they are still working on related to this whole change in ownership interest question
and so as I said, it’s getting little bit hard to kind of follow and keep up with those,
so what we will plan to do is bring back to our next general webcast, probably likely
in the fall, we‘ll do a more holistic look at the whole area, so a little incentive to
tune in in the fall if you are interested in that topic.
So moving on to the next area. Next thing I am going to talk about, is on the next slide,
oh sorry, I do have one more new for 2016, can’t forget this one, IAS 16 and IAS 38,
so there has been some amendments to clarify acceptable methods of depreciation for PP&E
and intangible assets. So, what is this amendment all about? So the amendment is addressing
so-called revenue based depreciation methods. So what’s a revenue based depreciation method?
That would be any time you would sort of look at an asset and say well I expect a certain
amount of revenue through the use of the asset, and so I will record depreciation based on
my progressed earning (of) that expected revenue. It’s sort of a high level description of
what a revenue based depreciation method might look like. I think we probably see them more
often in intangible assets than in PP&E, but it is not unheard of in PP&E as well. So what
does the amendment do? So when it comes to PP&E, the use of the revenue based depreciation
method has been prohibited. And then when it comes to intangible assets, they have established
in the standard, a rebuttable presumption that a revenue based amortization method is
likely inappropriate. There may be some judgment based ways to overcome that presumption and
still use the revenue based amortization method, but it is still a matter of judgment, and
the standard is kind of setting you up (indicating that) those methods should not be used any
longer. So, the amendments are effective for fiscal years starting January 1, 2016 on a
prospective basis, and so something to keep in mind there. We have seen, as we see our
early quarterly reporters coming through, we have seen a few companies that will probably
likely be making some changes to their accounting policies as a result of this new standard.
So hopefully, everybody who is affected by that is on top of that one.
So, on to the next area I’m going to talk about, and that’s starting on the next slide,
and it’s really a couple of areas that the IFRS interpretations committee has been looking
at. And actually in these cases, I’m actually going to be talking to you about situations
where they have decided not to pursue an interpretations committee project for the topic and questions.
So why do we look at places where, subjects where, the IFRS interpretations committee
has decided not to do something. A lot of times, we find when they report their decision,
there are some useful conclusions in there. So sometimes it’s an example of them saying,
“well we don’t need to do any work here because the guidance is already clear and
here is why we think it’s clear”. So in a way, by not taking on the project and explaining
why they think the guidance is clear, sometimes they do provide some sort of clarification
language that we can use, sometimes, when we are making these difficult accounting judgements
about how standards should be applied, so that’s one example. And then there’s are
other cases where they look at it and they say “yup, the standards are not clear and
we really can’t reason through to what the answer should be based on the standards and
so maybe it's an area that needs more standard setting beyond what the interpretations committee
can do”, so for example referring something to the International Accounting Standards
Board for a change to the actual standards. So the ones I’m going to talk about today
really is kind of an example of each. So the first one relates to, what do we do
with contingent consideration arrangements when you buy assets? So this is where we are
buying an asset, or collection of assets, that do not meet the definition of a business.
So when we buy a business, it is clear under the business combinations standard that you
do need to account for that contingent consideration from the date of acquisition, but we've never
had any clarity about what to do for a group of assets, or even a single asset, that doesn’t
constitute a business, and there are maybe some variable payments. So the interpretations
committees has actually been discussing this topic for, it is fair to say a number of years,
and it is an issue that does come up with a fair bit of frequency, especially in certain
industries. For example, we often see it in resource industries where somebody is buying
an early stage resource property, doesn’t meet the definition of a business, and there
will be follow-on payments. for example, if the mine, let’s say it is a mine, is developed
and brought into commercial production, sometimes maybe the purchaser will have to pay an additional
amount later when that commercial production target is achieved. So we've always considered
what to do, and it is not always that easy with these variable payments, and it also
comes upon the recipient’s side; so what does the seller of those assets do with those
contingent consideration or variable payments? So the IFRIC in their discussions have really
focused a lot of attention on whether the variable payment depends on the purchaser’s
future activity. So go back to my mining example. If the contingency is “you will make the
payment when you bring your new mine that you’ve bought, your mining assets that you
bought, into commercial production”. So that would be an example where we would say,
“yeah that depends on the purchaser’s actions because they will either bring it
to commercial production or not”, so that’s kind of their activity. So, they did focus
a lot on that question and really looked at, well if it is something that depends on the
purchaser's activities, maybe we should wait until those targets have been met or the purchaser's
activities have been completed before recording the amount that should be paid. And so, they
were hanging a lot of weight on finishing up the leasing standard, and saying well maybe
we can draw some analogies there on variable payments in a lease, and how those end up
getting treated in the leasing standard. So, fast forward to today, we have the leasing
standard and nevertheless, the IFRIC has recently concluded that they don’t have enough basis
to come to a conclusion on this, notwithstanding that we do have the leasing standard now.
They came up with mixed views, they were unable to reach a conclusion on this one, they have
concluded that the issue is too broad and so they are not adding it to their agenda,
and really the recommendation is that the International Accounting Standards Board needs
to take it on. So what did we learn from all this? Well, we don’t really have a lot of
answers on how to proceed in these situations. I guess it does confirm that it’s an area
of judgment and there may be some diversity in practice and room for different judgements,
so I think it’s an area where we say still tread carefully. It’s interesting but maybe
not that helpful that the IFRIC has decided to not take this issue on. The other thing
to note is this issue has been discussed in Canada, most recently by the IFRS Accounting
Standards Board’s IFRS Discussion Group in September 2014. So there are some papers
from both, or notes from the discussion, and that group discussed both the purchaser’s
view of the variable payments that they might have to make when they buy their asset, as
well as the seller's view as the recipient or potential recipient of those variable payments
when they sell the asset. So, there may be more to come on that one, stay tuned, it continues
to be an area for some significant judgment and maybe some difficulty.
Now, the next one on cash pooling is basically kind of the other example where I said they
reject the issue, but in their notes, they sometimes give us some helpful hints on how
they feel the standards should be interpreted at least in a particular situation. So often
times what the IFRIC will do is consider a situation that someone says to them. So in
this particular case, the submitter sent in a situation, it's explained on the slide.
So it’s a cash pooling arrangement where subsidiaries each have to have their own separate
bank accounts. At the reporting date, there is legally enforceable right to set off the
balances in these accounts, so this is getting at netting of financial instruments, offsetting
of financial assets with financial liabilities under IAS 32. So kind of, the question is,
what if some accounts are in asset position versus liability positions; Do we have the
legally enforceable rights to set those off? So, the answer in this case is “yes” and
the interest that’s calculated, so the interest that the bank will pay on all of these accounts
is calculated on the net balances, and the company does regularly initiate transfers
of the balances into a single account, so it is single netting account. So they will
do periodically these regular sweeps where they sweep all the accounts and put it all
into netting account. So that is happening, but the kicker here is, or the little glitch
here is, as of the reporting date, this is not necessarily done, it’s kind of done
periodically, but not necessarily at the reporting date and if it had been done at the reporting
date, then I guess we wouldn’t have an issue with offsetting, because we’d just have
everything in one account. And also at the reporting date, there is the ongoing expectation
that before the next sweep or netting day, transferring everything to the netting account,
the individual subsidiaries will continue to use the balances. The balances will change,
they will go positive to overdrawn maybe, so the question really that they considered
is, can the intent to settle net be demonstrated in such a situation? So remember, in order
to offset financial assets and liabilities, you’ll need the legal enforceable right
to set off, but you’ll also need the intention that those balances will be settled net or
simultaneously. So, in this case, they accepted that there is a legally enforceable right,
but did they meet the second condition with the intent? And so the conclusion here was
“no, the intent was not met because the balances would and could change before the
next sweep date”. So, that’s right in the rejection notice, it is a question that
sometimes comes up in practice. We do get questions about netting, and so really this
does illustrate, at least in this case how the question of intent should be considered.
So they did decide not to add this to their agenda. They concluded that maybe it wasn’t
widespread and they also thought that in this particular fact pattern, it was reasonably
clear that intent was not met. So that’s an example of one of the cases where maybe
what they said in their rejection notice can be a little bit instructive for other situations
where the question might come up. Okay, so switching gears a bit, I’m going
to now just give a little couple of updates regarding the revenue standard, so on the
next slide. So, as we know, we have IFRS 15, which is a reasonably conformed standard with
the revenue standard in the US GAAP, and we are working towards an effective date for
that standard of 2018. So, one of the things that happened recently is the IASB has issued
some clarifying amendments to the standard in April. So those are out there. Have a look
at them if you haven’t seen them. As you know, if you have been following the project,
the amendments are a result of the work of the so called TRG Discussion Group. So what’s
this group? This group, TRG stands for Transition Resource Group, I think. Anyway, so what their
job was to do, and it was joint US FASB and international being the IASB was a joint group,
and they were getting together to discuss implementation issues with their conformed
revenue standards. And so, they have been meeting over the last couple of years, and
dealing with a number of issues and one result of their work is these amendments that we
have, that we've seen under IFRS come out in April, and the FASB has also done some
amendments that came out earlier and which interestingly are not exactly the same as
our amendments. So what we have here is the situation where we've got a baseline conformed
standard, but perhaps the two groups being the US versus the international standard setters
are maybe going in slightly different directions on certain interpretive matters. So also interestingly,
the FASB is going to continue its work with the Transition Resource Group, the TRG, whereas
the IASB is not going to participate in that anymore, so it's possible that the situation
of maybe having some divergence will persist. So, as a result, the SEC has given a speech
in March regarding where they talked about the new revenue standard a bit and some of
the things that they are observing about it. And one of the observations that they made
is that they will have an expectation that domestic and foreign private issuer registrants
will have consistent reporting outcomes for identical transactions. So what does that
mean? So, obviously, they are regulating all the domestic issuers who file with them under
US GAAP but also foreign private issuers who are the folks from other countries who would
usually probably be filing with them under IFRS. So essentially what we are saying is
the SEC, notwithstanding with the fact that FASB is doing its own thing regarding clarifying
amendments and continuing to work with TRG, while the IASB is not, so notwithstanding
that situation, they are expecting domestic (i.e. US GAAP filers and IFRS filers) to both
adopt consistent interpretations of the standard, which means that foreign private issuers and
people following IFRS that want to file in the US are going to have to keep monitoring
the work of the TRG that’s going on in the US and be cognizant of making their accounting
judgements and selection of accounting policies in ways that align well with whatever interpretations
are coming out from the TRG work. So that’s an interesting situation. And then, there
is going to be the whole group of other IFRS filers who are not foreign private issuers
or may be Canadian domestic filers. So where does that leave them in terms of application
of IFRS and this ongoing work of the TRG? So interesting times, interestingly, we have
got a converged standard but then, we still have these possible areas of differences that
may emerge on the interpretive matters. So stay tuned to that one, and then the other
things that the SEC touched on in their speech is don’t forget to think about internal
controls, so that’s an important area as well with the new standard. They are looking
forward to seeing more detailed disclosures on the effects of the new standards during
the run up to implementation. And, yes, what I would encourage you to do is we are having
a webcast specifically dealing with revenue and IFRS 15 issues in June, so keep an eye
out for that if you are interested in that topic, and I’m sure there is more to come
on these and other topics related to the revenue standard. So, moving along, so here, the IASB
work plan, so let’s just touch on a couple of areas here, so there are few things, and
I guess I will remark it is a somewhat abridged version of the work plan, which can easily
be found on the IASB’s website, so we have given you the link at the bottom of the slide,
but this work plan this is based on a work plan that is up-to-date as of April 22nd.
So what have we got? In the next few months, we have some clarifications related to share-based
payments transactions, so that’s a final standard. We are expecting a Definition of
a Business exposure draft; so that’s one that I’m personally looking forward to seeing.
This is an area where we have seen some diversity and difficulty in practice, and really the
question is: what constitutes a business under IFRS 3, the business combinations standard?
And of course as you know the difference, there can be some big differences if you've
got a business that you've acquired: you have goodwill, your transaction costs get expensed,
and a few other differences that can be important. And so whereas if your collection of assets
is considered not to be a business, you wouldn’t have goodwill, transaction cost would be capitalized
into the cost and so on. So this is an important question, I think this is an area that deserves
some clarification because it really has been an area that we've struggled with I think
a fair bit since the adoption of IFRS. So, stay tuned for that one, that’s an exposure
draft. And the last item in the under the 3-month category is, as I mentioned, more
clarification hopefully around changes in ownership interests, so we will be bringing
that one back to you in a future webcast. So, a little bit further out, we've got an
expected final standard on some amendments to basically the application of IFRS 9 by
insurance companies, so if you are an insurance company reporter, I’m sure you are well
aware of that one and they are expecting to issue the final standard, I would say before
the end of this year, which is good. And the next one IFRS 8 for those of you who are not
up to date on what your IFRS standard numbers are, so the IFRS 8 is Post Implementation
Review Related to Segment Disclosures, so that’s an area, if we go back to last slide
please, that’s an area where we do see a lot of, certainly there is a lot of regulator
interest in application of segment disclosures and how people/r companies are making judgements
in those areas about what there operating segments are. So, this is the IASB regularly
does these post-implementation reviews of reasonably new standards, which IFRS 8 is
reasonably new to IFRS, and so coming out of that, they are going to be proposing some
clarifying amendments in an exposure draft. And then finally, just a couple of things
to touch on, some of the later ones but important projects, or at least yes some important projects
still to come: insurance contracts expected after six months, the conceptual framework.
We are waiting for some final standard setting activity there. The next one, Classification
of Liabilities and, this is classification of liabilities as between current and long
term in your balance sheet, and so this is another important area where we have had some
interpretive difficulties I would say, out of the IFRS language in IAS 1, particularly
regarding when liabilities need to be classified as current in certain circumstances. So, hopefully,
these will be helpful amendments and we are expecting to see them in the reasonably nearer
term. The last two in the grey boxes are discussion papers, so they will be further out, for example,
if you are following the rate regulated activities project, it does seem like it is a ways off
because they have done one discussion paper, and then they are proposing that they will
do another one. So they are not moving to standard setting activities just yet on that
one. So finally, some regulatory updates included
on the next slide. We had late last year, the Canadian Securities Administrators issued
this national instrument on non-GAAP measures. It is in partially at least in reaction to
the amendments to IAS 1 on financial statement presentation of additional subtotals in financial
statements, and other amendments to that standard. So, I would refer you to that one as an interesting
look if you are concerned about non-GAAP measures and current securities administrators’ thinking
on those. And related to that, the Deloitte US, so related to US filers perhaps, but may
be instructive for people using non-GAAP measures who are domestic Canadian issuers as well,
top 10 questions to ask when using a non-GAAP measure. So, as we know, non-GAAP measures
have continued to be kind of a sensitive area, especially with securities regulators. So
both of those should be interesting reads if you do make use of non-GAAP measures in
your external reporting. And then finally, just to mention that the Canadian Security
Administrators are doing continuous disclosure reviews as they always do, and we are certainly
starting to see some of them. Some of the topics that they are coming up include classification
of joint arrangements, as between joint operations and joint ventures, some of the questions
there, and also questions around the assessment of going concern in certain cases. So with
that, I guess I will just move to the slides where we, or the one slide, where we remind
people of the resources that are available to them. And thank you everybody for listening
in today and turn it back to you, John. Okay, thanks a lot Kerry. In addition to the
resources that we have referenced in this webcast, we would like to remind you about
Deloitte Canada’s Center for Financial Reporting website, or CFR for short. It features an
extensive collection of news and resources about accounting and financial reporting developments
relevant to the Canadian marketplace. The CFR can be accessed from IASplus.com, by selecting
“Canada English” from the dropdown menu in the top right corner of the web page.
I'd now like to thank our speakers today, Nomita Dan, Martin Roy and Kerry Danyluk;
also thanks to our behind the scenes team, Alexia Donoghue, Allan Kirkpatrick, Lea Zhu
and Chris Tynan. We hope you found this webcast helpful and informative. If you have any questions
or feedback, you can reach out to your Deloitte partner or Deloitte contact. And if you would
like additional information, please visit our website at www.deloitte.ca. And to all
of you viewing our webcast, thank you for joining us. This concludes our webcast “Bringing
Clarity to an IFRS World: IFRS 16 Leases and Other Financial Reporting Matters”.