Financial accounting updates — International Financial Reporting Standard 16 Leases implementation


Application of IFRS 16 to the measurement of PFI liabilities

Application of IFRS 16 measurement principles to PFI liabilities is effective from 1 April 2023.

DHSC PFI accounting model – updated for IFRS 16 (updated 15 December 2023)

In 2009 DHSC procured a national PFI model to support the transition to IFRS in the NHS. DHSC has updated this model to incorporate remeasurement of PFI liabilities under IFRS 16 from 1 April 2023.
DHSC model – Accounting for PFI under IFRS 16  (version 2 – updated 15 December 2023 to include maturity of lease liability)

Guidance – PFI transition to IFRS 16

Original IAS 17 model and guidance from IFRS transition (referenced in appendix 3 of the IFRS 16 guidance document)

NHS PFI liability remeasurement FAQ (updated 15 December 2023)

This frequently asked questions (FAQ) document provides additional guidance on the application of IFRS 16 measurement principles to PFI liabilities.

PFI remeasurement guidance – FAQ – updated 15 December 2023

Main IFRS 16 guidance

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

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 – FAQ – updated 9 December 2022

IFRS 16 NHS impact forecast exercise

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

NHS provider IFRS 16 transition submission

This guidance accompanies the NHS provider IFRS 16 transition submission, due for return on 28 October 2022.

Supporting IFRS 16 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 9 December 2022

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 2021: The HM Treasury incremental borrowing rate has been updated to 0.95%, as confirmed by HMT in December 2021.
  • Update 9 December 2022: Error in the allocation of future lease payments to maturity bands corrected

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 – updated 9 Dec 2022
    • 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