Short-Term Exemption (IFRS 16)
Category
IFRS 16
The IFRS 16 short-term lease exemption allows lessees to elect not to recognize right-of-use assets and lease liabilities for leases with a term of 12 months or less at the commencement date. The exemption must be applied by class of underlying asset. Lease expense is recognized on a straight-line basis or another systematic basis.
Why it matters
The short-term exemption is nearly identical between IFRS 16 and ASC 842, but IFRS 16 requires it to be applied by asset class (all or nothing per class), while ASC 842 allows lease-by-lease election. This means an IFRS 16 reporter cannot exempt some short-term office leases while capitalizing others. if they elect the exemption for office space, all short-term office leases must use it.
How Arvexi handles this
Arvexi enforces the class-level consistency requirement for IFRS 16 short-term exemptions. When an organization elects the exemption for an asset class, the platform automatically applies it to all qualifying leases in that class and flags any inconsistencies. Expense from exempt leases is disclosed separately as required.