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Transactions
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Creditor updates
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Cloud Accounting

By automating standard administrative and accounting work, cloud accounting with Grant Thornton can free up your time to concentrate on more important work...

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Indigenous Services

Legacy is not only about honouring the past—it’s also about looking forward and continuing to build upon those values, traditions, and achievements to create...

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Agriculture

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Cannabis

Whatever your goal, the experts at Grant Thornton are ready to work with you to map out a plan for success. As members of the Global Cannabis Partnership...

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Charities & not-for-profit

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Real Estate And Construction

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Builders And Developers
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Rental Property Owners And Occupiers
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Real Estate Service Providers
Your company plays a key role in the success of landlords, investors and owners, but who is doing the same for you?

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Energy and natural resources

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Mining
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Oil & gas
The oil and gas industry is facing many complex challenges, beyond the price of oil. These include environmental issues, access to markets, growing competition from alternative energy sources and international markets, and a rapidly changing regulatory landscape, to name but a few.

Financial Services

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Manufacturing & distribution

Canadian manufacturers seeking to grow their businesses must address common issues, including limited access to finance, high raw material costs, inflexible...

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Private equity

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Professional services

Professional services firms face a dual challenge: anticipating and managing change not only for your clients, but also for your business. In today’s...

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Power & Utilities

At Grant Thornton, we have the real-world experience and knowledge that can help you in considering all of your strategic alternatives. Whether it be managing...

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IFRS

Insights into IFRS 16: Understanding the discount rate

01 Nov 20181 min read

Under IFRS 16 ‘Leases’, discount rates are used to determine the present value of the lease payments used to measure a lessee’s lease liability.

Discount rates are also used to determine lease classification for a lessor and to measure a lessor’s net investment in a lease.

For lessees, the lease payments are required to be discounted using:

the interest rate implicit in the lease (IRIL), if that rate can be readily determined, or
the lessee’s incremental borrowing rate (IBR).

For lessors, the discount rate will always be the interest rate implicit in the lease. The interest rate implicit in the lease is defined in IFRS 16 as ‘the rate of interest that causes the present value of (a) the lease payments and (b) the unguaranteed residual value to equal the sum of (i) the fair value of the underlying asset and (ii) any initial direct costs of the lessor.’

The lessee’s incremental borrowing rate is defined in IFRS 16 as ‘the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment’.

Insights into IFRS 16: Understanding the discount rate

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Insights into IFRS 16: Understanding the discount rate

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