Short-term lease exemption
An accounting policy election that allows leases of 12 months or less to be kept off the balance sheet.
Definition
IFRS 16 and amended FRS 102 allow lessees to elect not to recognise a right-of-use asset and lease liability for leases with a term of 12 months or less at the commencement date. Instead, lease payments are recognised as an expense on a straight-line basis or another systematic basis. The exemption is an accounting policy choice applied by class of underlying asset.
Why it matters
The exemption can simplify accounting for rolling short-term arrangements. However, it must be applied consistently to all leases of that asset class, and the policy must be disclosed.
In AuditLease
AuditLease allows the short-term exemption to be applied per lease. Exempted leases are excluded from liability and ROU calculations but are included in the statutory note disclosure of short-term lease expense.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence — so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.