Royal Dutch Shell, BP and Sainsbury’s have the largest operating lease obligations from the FTSE 350 which will have to be declared under IFRS 16 regulations.
The data of FTSE 350 companies, provided by software company LeaseAccelerator, shows that topping the list is Royal Dutch Shell, which has £18.2bn in operating lease obligation. Placed second was fellow oil and gas producers BP, with £10.9bn. Sainsbury’s and the Vodafone Group had £10bn and £8.6bn respectively in operating lease obligations.
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IFRS is a set of lease accounting standards that has begun to take effect from the beginning of this year, with the International Accounting Standards Board (IASB) estimating it will require companies to transfer an estimated £2.32tn ($3tn) of operating leases onto corporate balance sheets as right-of-use assets and corresponding lease liabilities.
Historically, only a limited set of information about operating leases has been reported in annual financial reports. Under the new IFRS 16 standards, companies are required to add new line items to the balance sheet for these operating leases.
Michael Keeler, chief executive officer of LeaseAccelerator, said: “With the first interim statements to be reported under IFRS 16 now imminent, chief financial officers need to start developing strategies for communicating these balance sheet changes to their investor communities. The publication of this report will help provide companies and chief financial officers with a perspective on the relative size and significance of their operating lease obligations compared to their industry peers.”
Filling out the top ten of FTSE 350 companies with the highest operating lease obligations were International Airlines Group, BT Group, IWG, Associated British Foods, Marks & Spencer, and First Group.
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By GlobalDataNotable inclusions further down the list included HSBC in 12th place with £3.1bn in operating lease obligations, Barclays in 15th place with £2.5bn, and RBS Group in 17th place with £2.3bn.
The data was sourced by LeaseAccelerator from information provided in the company’s most recent annual financial reports.
Last December Paul Lippitt, principal consultant at fleet leasing company Lex Autolease, discussed in Leasing Life the seven steps to ensure smooth implementation for companies adapting to IFRS 16.
