Public Sector procurement professionals will need to consider the implications of IFRS 16 when undertaking procurements. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases.
IFRS 16 requires a lessee to recognise assets and liabilities for leases with a term of
more than 12 months, unless the underlying asset is of low value. A lessee is
required to recognise a right-of-use asset representing its right to use the underlying
leased asset and a lease liability representing its obligation to make lease payments.
It is imperative that the correct information is available to assess if IFRS 16 applies to a new procurement.
Procurement will need to consult with Finance Department to establish if there are assets within the proposed contract, who controls them, and who obtains the economic benefit in order to determine if there is a lease agreement under IFRS 16. If there is, additional information requests will be required as part of the procurement process.
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