## GFSM 2014 update — Proposed Recommendations: 1.6 Financial and Operating Leases

## Source details

**Canonical URL:** [GFSM 2014 update — Proposed Recommendations: 1.6 Financial and Operating Leases](https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/proposed-recommendations-gfsm-2014-update-1-6-operating-and-financial-leases.pdf)

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### Summary
- Recommendation: Maintain the current conceptual approach in GFSM 2014 (paras. A4.4-A4.15) to distinguish financial and operating leases based on whether the lessor transfers substantially all risks and rewards of ownership to the lessee (financial lease) or retains those risks and rewards (operating lease).
- Proposal: Develop practical guidance on differences between statistical and accounting lease concepts and how to use accounting data sources to distinguish between, and value, operating and financial leases in accordance with the GFSM.
- Proposed research vehicle: GFSM Update research project 2.27 Relationship between GFS and IPSAS (also referenced as 1.27 in the summary details).

### Background and key issues
- Accounting standard changes:
  - IFRS 16 released on January 1, 2019, replacing IAS 17.
  - IPSAS 43 replaced IPSAS 13 in January 2022 and is based on the same principles as IFRS 16.
- Divergence between accounting and statistical treatments:
  - Statistical manuals (2008 SNA, BPM6, GFSM 2014) and prior accounting standards (IAS 17, IPSAS 13) aligned on classifying leases as operating or financial based on economic ownership (risks and rewards).
  - Under IFRS 16 / IPSAS 43:
    - Lessees do not distinguish between operating and financial leases; they account for all leases over 12 months by recognizing a “right-to-use” asset and a lease liability.
    - Lessors continue to distinguish between financial and operating leases based on control over the asset.
    - Resulting asymmetry: lessor accounting differs from lessee accounting for leases with a duration of more than one year.
- Statistical accounting principle at stake:
  - Symmetrical quadruple-entry accounting in the SNA requires assets be recorded on the balance sheet of only one party, with flows recorded equally in both parties’ accounts; the asymmetry under IFRS 16 / IPSAS 43 poses challenges for statistical compilers.
- Considered alternatives:
  - BPM Guidance note C.5 considered a “one-year rule” (leases with duration less than one year considered operating; longer leases considered financial).
  - After consultation, the decision was no change in draft 2025 SNA and BPM7 on economic ownership and lease identification; instead, develop practical compilation guidance.
- Consultations and discussions:
  - Global consultations: BP Consultation: October 2020; August 2021.
  - BOPCOM discussion: October 2020.
  - Discussions at the Advisory Expert Group on National Accounts (AEG) / Balance of Payments Committee (BOPCOM): BOPCOM: October 2020.
  - Discussions at GFSAC: To be determined.

### Proposed recommendations (explicit)
- Maintain current GFSM 2014 approach (paras. A4.4-A4.15) for distinguishing financial and operating leases based on whether the lessor has conveyed substantially all risks and rewards of ownership of the asset to the lessee (financial lease) or retained them (operating lease).
- Develop practical guidance on data sources, compilation methods, and clarifications on differences between accounting (IFRS 16 / IPSAS 43) and statistical standards.
  - Proposed to develop that guidance as part of GFSM Update research project 2.27 Relationship between GFS and IPSAS.
  - The research project would propose what text to include in the updated GFSM and what should be a separate compilation note.

### Rationale for the recommendations
- Maintain harmonization between the updated GFSM and the 2025 SNA and BPM7, identified as a key objective of the GFSM 2014 update process.
- Recognize practical challenges in using accounting data on leases to compile GFS; these challenges are shared by other statistical compilers, so coordinated compilation guidance with SNA and BPM updates would be beneficial.

### Proposed text and next steps
- No conceptual changes to the GFSM 2014 text on financial and operating leases are proposed under the research project.
- Development of additional practical guidance under GFSM Update research project 2.27 (Relationship between GFS and IPSAS) on the differences between IPSAS 43 Leases and GFS could lead to revisions in the updated GFSM.

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_Source: https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/proposed-recommendations-gfsm-2014-update-1-6-operating-and-financial-leases.pdf_