## 2.3 Financial and Operating Leases

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**Canonical URL:** [2.3 Financial and Operating Leases](https://www.imf.org/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-23-financial-and-operating-leases.pdf)

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### Summary
- Proposed recommendation for the 2028 Monetary and Financial Statistics Manual (2028 MFSM): retain existing conceptual approach to recording financial leases as outlined in the IMF’s 2016 Monetary and Financial Statistics Manual and Compilation Guide (MFSMCG) (paras. 4.89-4.92).
- Maintain a clear distinction between financial and operating leases based on the concept of economic ownership.
- Distinguish between the recording of leases for macroeconomic statistical purposes and the accounting concepts of leases (IFRS 16).
- Links to related guidance: C.5 Statistical Impact of the Change in Treatment of Operating Leases in Business Accounting; Economic Ownership in the Context of Financial and Operating Lease Transactions Pertaining, in Particular, to Aircraft; 2025 System of National Accounts (SNA) and Integrated Balance of Payments and International Investment Position Manual, Seventh Edition (BPM7).

### Background and issues
- Previous statistical manuals (2008 SNA, BPM6, GFSM 2014 and MFSMCG) aligned with IAS 17 Leases, distinguishing operating and financial leases based on economic ownership (allocation of risks and rewards).
- Under the IAS 17 approach:
  - Financial lease: legal owner (lessor) transfers the risks and rewards of ownership to the economic owner (lessee); lessor is effectively granting a loan and the lessee acquires the asset.
  - Operating lease: legal and economic owner are the same (lessor); no imputed loan and asset remains on lessor’s balance sheet.
- IFRS 16 (effective January 2019) changed lessee accounting:
  - Lessees account for all leases over 12 months in the same way and are not required to distinguish between operating and financial leases.
  - For both operating and financial leases, lessees recognize a “right-to-use” asset and a lease liability.
  - Lessees can choose not to apply this approach in two specific cases, treating them as simple expenses instead: short-term leases (leases with a term of 12 months or less), and leases of low-value assets.
- Lessor accounting under IFRS 16 remains largely unchanged from IAS 17; lessors continue to distinguish between financial and operating leases based on transfer of risks and rewards.
- Asymmetry arises because lessee accounting under IFRS 16 differs from lessor accounting, contrary to the symmetry expected by quadruple-entry accounting in the SNA (assets recorded on only one party’s balance sheet and flows recorded equally).
- The 2025 SNA and BPM7 reaffirm economic ownership (allocation of risks and rewards) as central for macroeconomic statistics and note that the asymmetry introduced by IFRS 16 is due to accounting presentation choices rather than changes in economic ownership.
- Guidance Note C.5 considered two options:
  - (i) maintain consistency with the 2008 SNA and BPM6 by recognizing the operating/finance leasing distinction along the concept of economic ownership;
  - (ii) distinguish leases by a “one-year rule” (leases with a duration of more than one year considered financial leases).
- C.5 recommended no change in the 2025 SNA and BPM7 with respect to economic ownership and the distinction between lease types, and recommended additional practical guidance on compilation and mapping from accounting to statistical standards; that recommendation was adopted by the Advisory Expert Group on National Accounts and the IMF Committee on Balance of Payments Statistics.
- Discussions and consultations: Global Consultation(s): BP: October 2020; August 2021. BOPCOM: October 2020. Discussions at MFSAC Meeting(s): March 2026.

### Proposed recommendations (for the 2028 MFSM)
- Maintain the distinction between financial and operating leases based on economic ownership determined by the lessor substantially conveying the risks and rewards of ownership of the asset to the lessee, consistent with the 2025 SNA and BPM7, and do not adopt the IFRS 16 right-to-use concept for statistical purposes.
- Explicitly acknowledge the divergence between statistical standards and IFRS 16, and provide practical guidance to compilers (by way of compilers’ notes) on how IFRS-based accounting data can be mapped to operating and financial leases.

### Rationale
- Preserving the economic ownership distinction will:
  - Preserve symmetry in macroeconomic accounts;
  - Avoid double-counting of assets and liabilities;
  - Ensure consistency across all macroeconomic statistics.
- The recommendations recognize practical challenges for compilers using accounting data on leases as a source for monetary and financial statistics.

### Proposed text changes for the MFSM update
- Adjust MFSMCG para 4.92 to recognize the difference between the 2025 SNA (Chapter 27) and BPM7 (Chapter 5) guidance and IFRS 16. Proposed insertion (quoted):
  - "MFSMCG para 4.92: These conditions in the lease contract may not, however, demonstrate conclusively that substantially all of the risks have been conveyed; for example, if the asset is conveyed to the lessee at the end of the lease at its fair value at that time, then the lessor holds substantial risks of ownership. The lease is then called an operating lease. Financial leases are also called finance leases, capital leases, or full-payout leases, highlighting that the motivation is to finance acquisition of the asset. Accounting practices do not recognize financial leases in the same way as in macroeconomic statistics. The IFRS 16 does not distinguish between operating and financial leases for lessees, and this difference should be taken into account when using accounting data for statistical compilation."
- Add an additional paragraph after para 4.92 clarifying that, for MFS, the distinction between financial and operating leases continues to be based on the transfer of economic ownership, consistent with the 2025 SNA and BPM7; consider a separate compiler’s note to guide mapping IFRS-based data to classify financial leases.
- Update Box 2.1 (International Financial Reporting Standards) of the MFSMCG to recognize that IAS 17 has been superseded by IFRS 16 and to explain that, while IFRS 16 introduces a right-to-use asset and lease liability for lessees, this accounting treatment does not imply a change in economic ownership for macroeconomic statistics.

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_Source: https://www.imf.org/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-23-financial-and-operating-leases.pdf_