IFRS 16 vs. VAS 6

Attribute	IFRS 16	VAS 6
Scope	Applies to all leases	Applies to all leases
Recognition	Lease assets and liabilities recognized on balance sheet	Lease assets and liabilities recognized on balance sheet
Measurement	Lease liability measured at present value of lease payments	Lease liability measured at present value of lease payments
Lease Term	Includes non-cancellable period and optional renewal periods	Includes non-cancellable period and optional renewal periods
Lease Payments	Includes fixed payments, variable payments, and purchase options	Includes fixed payments, variable payments, and purchase options
Lease Classification	Operating lease or finance lease	Operating lease or finance lease
Lease Modification	Accounted for as a separate lease	Accounted for as a separate lease
Disclosure	Extensive disclosure requirements	Extensive disclosure requirements

Introduction

IFRS 16 and VAS 6 are two accounting standards that provide guidelines for lease accounting. While IFRS 16 is an international standard developed by the International Accounting Standards Board (IASB), VAS 6 is a Vietnamese accounting standard issued by the Ministry of Finance of Vietnam. Both standards aim to improve transparency and comparability in financial reporting by addressing the recognition, measurement, presentation, and disclosure of leases. In this article, we will compare the attributes of IFRS 16 and VAS 6, highlighting their similarities and differences.

Scope and Applicability

Both IFRS 16 and VAS 6 apply to leases, which are defined as contracts that convey the right to use an asset for a period of time in exchange for consideration. However, there are differences in their scope. IFRS 16 applies to all leases, except for leases of low-value assets and short-term leases (leases with a term of 12 months or less). On the other hand, VAS 6 applies to all leases, regardless of their value or term. This means that VAS 6 has a broader scope compared to IFRS 16.

Furthermore, IFRS 16 provides specific guidance on how to account for leases in the financial statements of lessees and lessors. In contrast, VAS 6 only provides guidance for lessees, and lessors are required to follow other relevant accounting standards.

Recognition and Measurement

Both IFRS 16 and VAS 6 require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases within their scope. However, there are differences in the measurement of these assets and liabilities.

Under IFRS 16, lessees are required to measure the right-of-use asset at the present value of lease payments, adjusted for any lease incentives, initial direct costs, and estimated restoration costs. The lease liability is also measured at the present value of lease payments, but it includes the interest expense over the lease term. This results in a front-loaded expense recognition pattern, where higher expenses are recognized in the earlier years of the lease.

On the other hand, VAS 6 allows lessees to choose between two measurement models: the cost model and the fair value model. Under the cost model, the right-of-use asset is initially measured at cost and subsequently depreciated over the lease term. The lease liability is measured at the present value of lease payments. Under the fair value model, the right-of-use asset is initially measured at fair value and subsequently remeasured at fair value. The lease liability is also measured at the present value of lease payments. This flexibility in measurement models provides lessees with more options compared to IFRS 16.

Lease Term and Extension Options

Both IFRS 16 and VAS 6 provide guidance on determining the lease term and handling extension options. However, there are differences in their approaches.

IFRS 16 defines the lease term as the non-cancellable period of the lease, including any periods covered by extension options if it is reasonably certain that the lessee will exercise those options. This means that the lessee needs to consider all relevant factors when assessing the likelihood of exercising extension options. If the lessee is reasonably certain to exercise an extension option, the lease term is extended accordingly.

On the other hand, VAS 6 defines the lease term as the non-cancellable period of the lease, excluding any periods covered by extension options. This means that the lessee does not consider extension options when determining the lease term. If the lessee exercises an extension option, a new lease is recognized.

Disclosure Requirements

Both IFRS 16 and VAS 6 require lessees to provide certain disclosures in their financial statements to enhance transparency. However, there are differences in their disclosure requirements.

IFRS 16 requires lessees to disclose information about the nature of their leases, including the amount recognized in the statement of financial position, the expense recognized in the statement of comprehensive income, and cash outflows related to leases. Lessees are also required to provide a maturity analysis of lease liabilities, as well as qualitative and quantitative information about significant leasing arrangements.

On the other hand, VAS 6 requires lessees to disclose information about the nature of their leases, including the amount recognized in the balance sheet, the expense recognized in the income statement, and cash outflows related to leases. Lessees are also required to provide a maturity analysis of lease liabilities, as well as qualitative and quantitative information about significant leasing arrangements. The disclosure requirements of VAS 6 are similar to those of IFRS 16, with minor differences in terminologies and presentation formats.

Conclusion

IFRS 16 and VAS 6 are two accounting standards that provide guidance on lease accounting. While they share similarities in terms of recognizing right-of-use assets and lease liabilities, there are differences in their scope, measurement models, treatment of lease term and extension options, and disclosure requirements. IFRS 16 has a narrower scope compared to VAS 6, and it provides more specific guidance for both lessees and lessors. On the other hand, VAS 6 has a broader scope and allows lessees to choose between different measurement models. Despite these differences, both standards aim to improve transparency and comparability in financial reporting, ensuring that leases are appropriately accounted for in the financial statements.