How should low value leases be treated under IFRS 16?

Low value leases under IFRS 16 can indeed be treated by expensing them on a straight-line basis over the lease term. This approach is available as a practical expedient in recognition of the low monetary value of these types of leases, which often do not provide a significant economic benefit to the lessee. By expensing them straight-line, companies can simplify their accounting processes and reduce the burden of tracking and recognizing lease assets and liabilities for leases that are not material in amount.

This treatment aligns with the principles of IFRS 16 that aim to provide a more straightforward accounting response for leases deemed low value, typically those items under a certain threshold (such as office equipment or small furniture). The straight-line recognition also matches the expense recognition with the consumption of the asset over the lease term, ensuring a consistent approach to expense accounting.

This option effectively acknowledges the practicality over complexity in situations where full IFRS 16 requirements would be disproportionately onerous compared to the economic reality of the leases.