Financial accounting updates — International Financial Reporting Standard 16 Leases implementation

Guidance on International Financial Reporting Standard (IFRS) 16 on Leases for NHS providers and commissioners. IFRS 16 will be implemented in the NHS from 1 April 2022.

Main guidance

DHSC Group Accounting Manual (GAM) 2022/23

The DHSC GAM for 2022/23 contains guidance on the application of the standard for the NHS.
DHSC GAM 2022/23 (chapter 4 annex 11 in particular)

NHS IFRS 16 implementation guide

Our updated IFRS 16 implementation guide pulls together various sources of guidance and includes a timetable with milestones for IFRS 16 implementation. It also provides further details of individual tasks and national exercises that will support implementation of the Standard.
IFRS 16 implementation guide

NHS IFRS 16 frequently asked questions

This frequently asked questions (FAQ) document provides guidance on technical aspects of implementing IFRS 16.
IFRS 16 guidance – FAQs – updated 7 January 2022

IFRS 16 NHS impact forecast exercise

This guidance accompanies the NHS IFRS 16 impact forecast, due for return on 12 January 2022.

Supporting tools from DHSC

DHSC IFRS 16 implementation training presentation

This Powerpoint IFRS 16 Implementation Slide Deck from DHSC is a training slide deck that explains principles of the IFRS 16 and how accounting for leases changes under the new standard. It has been developed with finance and operational/commercial users in mind, to help colleagues assess the impact of IFRS 16 on accounting, budgeting and operations.

DHSC example lease register

This example lease register from DHSC is for recording of leases from the perspective of a lessee. This example register may be useful to entities that are considering what level of data is required to be collected to inform the accounting and budgeting entries for each lease, or have not yet developed a lease register or finalised a systems approach. It is shared for information purposes and does not form part of a mandatory data collection requirement.

DHSC lease accounting tool – updated December 2021

This DHSC lease accounting tool is a spreadsheet tool developed by DHSC which helps to calculate and summarise liability and asset values under IFRS 16 for each lease entered in the tool. It is optional for use.

  • Please read the guidance in the workbook – some limitations of the tool are explained as tips with yellow stars.
  • Users may wish to avoid re-using the lease numbers that now contain worked examples as some of the formulas on the detail calculation sheets have been overwritten to reflect subsequent remeasurements in those examples.
  • If the tool is used for existing operating leases transitioning on 1 April 2022, please enter the start date for the lease term as 1 April 2022 and do not enter a rate implicit in the lease as the the HM Treasury incremental borrowing rate should be used for all previous operating leases on transition.
  • Further update 16 December: The HM Treasury incremental borrowing rate has been updated to 0.95%, as confirmed by HMT in December 2021.

DHSC worked example spreadsheets

DHSC has developed a series of worked examples that illustrate the calculation of lease accounting entries and the impact on accounts in each scenario.

Worked examples: simplified scenarios

Worked examples: more complex examples

    • Scenario three — operating lease (including upfront payments, initial direct costs and lease incentives)
    • Scenario four — finance lease (including different discount rates used by the lessee and the lessor)
    • Scenario five — early termination of the lease
    • Scenario six — sublease arrangement
    • Scenario seven — cumulative catch up – operating lease on transition to IFRS 16
    • Scenario eight — sale and leaseback arrangement
    • Scenario nine — revaluation of the right of use asset
    • Scenario 10 – reassessment of the lease liability (with no change in discount rate)
    • Scenario 11 – reassessment of the lease liability (with change in the discount rate)
    • Scenario 12 – lease remeasurement with RPI uplift in annual payments

Each example above is titled based on its main feature. The table below illustrates which leasing concepts are included in each scenario:

Table of lease concepts