Describe the difference between finance leases and operating leases for a lessee under IFRS 16.

Describe the difference between finance leases and operating leases for a lessee under IFRS 16.

• A. Under IFRS 16, nearly all leases are recognized as right-of-use assets with a lease liability; depreciation and interest are recognized instead of separate operating lease expense for lessees.
• B. Finance leases are expensed as operating lease payments.
• C. Operating leases create a right-of-use asset; finance leases only disclosure.
• D. Both types are treated identically to rent expense.

Answer: (A)