Lease Accounting Standards Around the World: Who Uses What

If your company operates across borders or if you are a firm serving multinational clients with international lease exposure, understanding which lease accounting standard applies in each jurisdiction is essential. The good news: there are really only a handful of frameworks that matter. The challenge: local equivalents often have subtle naming differences and, occasionally, minor implementation variations that can catch teams off guard during consolidation.

At a high level, three standards cover the vast majority of commercial lease accounting worldwide: IFRS 16 (and its local equivalents), ASC 842 in the United States, and the revised Section 20 of FRS 102 in the United Kingdom and Ireland. Beyond these, a smaller number of jurisdiction-specific frameworks may apply in different regions or sectors.

This article maps out which standards apply where, and highlights what multinational groups need to keep in mind when managing multi-jurisdictional lease exposure.

IFRS 16 and Its Equivalents: The Global Majority

IFRS 16, issued by the International Accounting Standards Board (IASB), is the most widely adopted lease accounting standard in the world. It applies in over 140 jurisdictions, spanning the European Union, much of Asia, Africa, the Middle East, and South America. Under its single lessee model, virtually all leases are recognised on the balance sheet as a right-of-use asset and a corresponding lease liability.

Many countries adopt IFRS 16 directly as issued by the IASB. Others issue their own standards that are substantively identical, with the same core requirements. Some equivalents include:

• Australia: AASB 16, issued by the Australian Accounting Standards Board
• India: Ind AS 116, issued by the Ministry of Corporate Affairs
• Hong Kong: HKFRS 16, issued by the Hong Kong Institute of Certified Public Accountants
• Singapore: SB-FRS 116 / SFRS(I) 16, issued by the Accounting Standards Council
• New Zealand: NZ IFRS 16, issued by the External Reporting Board
• South Africa: IFRS 16 adopted directly, with endorsement by SAICA and the Financial Reporting Standards Council
• Canada: IFRS 16 for publicly accountable enterprises, adopted by the Accounting Standards Board (AcSB)
• European Union: IFRS 16 as endorsed by the European Commission, following technical assessment by EFRAG

Although local equivalents are generally aligned with IFRS 16, they may include minor nuances, carve-outs, or additional guidance that result in occasional variations in practice.

The single lessee model is the defining feature of IFRS 16. Unlike its predecessor IAS 17, which distinguished between operating and finance leases for lessees, IFRS 16 requires nearly all leases to be capitalised. This consistency across 140+ jurisdictions makes group consolidation far simpler for international businesses, provided all subsidiaries are reporting under IFRS or its equivalent.

For comprehensive guidance on the standard, see our IFRS 16 guide suite.

ASC 842: United States GAAP

ASC 842, issued by the Financial Accounting Standards Board (FASB), is the US GAAP lease accounting standard. It applies to all US public and private companies reporting under Generally Accepted Accounting Principles.

The most significant difference from IFRS 16 is that ASC 842 retains a dual classification model for lessees. Leases are classified as either operating leases or finance leases. Both classifications require the lessee to recognise the lease on the balance sheet (unlike the previous standard, ASC 840, where operating leases were off-balance-sheet). The classification affects the expense pattern and financial statement presentation. Under an operating lease, the lessee recognises a single lease expense on a straight-line basis. Under a finance lease, the lessee recognises amortisation of the right-of-use asset and interest on the lease liability separately. IFRS 16, by contrast, uses a single model in which all leases follow the finance-lease pattern.

This distinction is not merely academic. It affects reported EBITDA, operating profit, and the cash flow statement. For multinational groups with US subsidiaries reporting under ASC 842 and a parent reporting under IFRS 16, reconciling the two treatments is a recurring consolidation task.

ASC 842 also applies to non-US issuers ('Foreign private issuers') listed on US exchanges that report under US GAAP, as well as to US subsidiaries of international groups preparing local statutory accounts.

For full guidance, refer to our ASC 842 guide and for a detailed side-by-side comparison, refer to ASC 842 vs IFRS 16.

FRS 102: United Kingdom and Ireland

Although IFRS (and IFRS 16) is mandatory for listed groups in the UK and may be adopted by other entities, the revised Section 20 of FRS 102 introduces IFRS 16-style lease accounting for UK and Irish entities that do not apply full IFRS, including private companies, charities, and certain smaller listed entities in the Republic of Ireland. Effective for accounting periods beginning on or after 1 January 2026, these changes represent the most significant shift in lease accounting under UK GAAP in decades and bring it broadly in line with international practice.

The model is closely aligned with IFRS 16, with some deliberate simplifications. For example, FRS 102 uses the term "obtainable borrowing rate" rather than "incremental borrowing rate", and provides explicit lists for the low-value asset exemption rather than relying on the general guidance in IFRS 16. The practical effect is similar, but the language and application guidance differ in places.

For a complete overview, refer to our FRS 102 guide, and for a comparison with the international standard, refer to FRS 102 vs IFRS 16.

Other Frameworks

Beyond the three main commercial standards, several other frameworks apply to specific sectors or entity types.

GASB 87 and GASB 96 (United States)

These standards apply to US state and local government entities. GASB 87 covers general leases, while GASB 96 addresses subscription-based information technology arrangements (SBITAs). The GASB model differs meaningfully from ASC 842: it uses a single model (no dual classification) and its measurement and disclosure requirements are tailored to a public-sector context. GASB 87 has been effective since June 2021.

IPSAS 43 (International Public Sector)

Issued by the International Public Sector Accounting Standards Board (IPSASB), IPSAS 43 applies to public sector entities in jurisdictions that have adopted IPSAS. It follows a single lessee model similar to IFRS 16, adapted for the public sector. It is effective for periods beginning on or after 1 January 2025.

Canadian ASPE (Part II)

Canadian private enterprises that report under Accounting Standards for Private Enterprises (ASPE, Part II of the CPA Canada Handbook) follow a separate lease standard. The ASPE requirements are less comprehensive than IFRS 16 and retain the traditional operating/finance lease distinction. This framework applies only to Canadian private enterprises that have elected not to use IFRS.

These frameworks are niche by comparison. The vast majority of commercial entities worldwide fall under IFRS 16, ASC 842, or FRS 102.

What Entities Reporting Under Multiple Accounting Frameworks Need to Know

Some companies are required to report under multiple standards simultaneously ("dual reporters"). A UK subsidiary of a US parent might prepare FRS 102 accounts locally while also reporting under ASC 842 for group consolidation purposes. An Australian subsidiary of a UK group might use AASB 16 locally and IFRS 16 at a group level (these are equivalent, so no reconciliation is needed). But where the standards genuinely differ, the reconciliation work is unavoidable.

The key challenges for dual reporters include:

• Classification differences: ASC 842's dual model (operating vs finance) produces different expense patterns and financial statement presentation compared to IFRS 16's single model. A lease classified as an operating lease under ASC 842 may need to be treated as a finance-style lease under IFRS 16 at a group level.
• Discount rate rules: The three standards have different rules and terminology for determining the discount rate. IFRS 16 uses "incremental borrowing rate", FRS 102 uses "obtainable borrowing rate", and ASC 842 uses "incremental borrowing rate", each with different practical application guidance. Small rate differences compound across large portfolios.
• Exemption thresholds: The low-value asset and short-term lease exemptions are similar across standards but not identical. FRS 102 provides explicit value lists, whereas IFRS 16 offers general guidance. These differences can mean a lease is exempt under one standard but not another.

The practical advice for dual reporters is straightforward: use software that supports multiple standards from a single lease data set, so you avoid maintaining separate spreadsheets for each framework. Reconcile the differences at a group level and document the consolidation adjustments clearly. Your auditors will expect to see a trail from local accounts to group reporting.

For detailed comparisons, refer to ASC 842 vs IFRS 16 and FRS 102 vs IFRS 16.

Summary Table

The table below summarises the major lease accounting standards currently in force.