www.managedITmag.co.uk 17 – costs remain a straightforward expense. Risk reduction – avoids repair and obsolescence issues. Predictable budgeting – fixed monthly costs. No hidden costs of ownership – disposal, security, repairs and downtime often exceed initial forecasts. In practice, many firms find that accessing new technology via the subscription model is more financially sustainable – particularly when budgets are tight and technology lifecycles are short. FRS 102 and IFRS 16 changes from 2026 The key change is that lessees will no longer distinguish between finance and operating leases. Most leases will be recognised on-balance sheet with two main exceptions: 1. Short-term leases – 12 months or less without purchase option. 2. Low-value asset leases – including computers, tablets, and small office equipment. For qualifying exemptions, lease payments continue to be recognised as an expense on a straight-line basis. This maintains the current treatment most businesses are familiar with. Practical next steps for CFOs Heads of finance should: 1. Review existing lease agreements to determine which may be affected by 2026 changes. 2. Document low-value asset policies clearly for audit purposes. 3. Ensure auditor agreement on the treatment of computer leases. As with many financial matters, nuances abound, and what may be leases must go on the balance sheet” without mentioning exemptions. 2. IFRS 16 focus – most coverage discusses IFRS 16, which most UK SMEs do not use. 3. No fixed sterling threshold – uncertainty over what constitutes “low value”. The financial case forleasing With the ability to expense computer leases clearly established, what are the advantages of Devices as a Service (DaaS) subscriptions for UK firms? Consider an SME procuring 120 laptops for employees: Purchase price per laptop: £900 Total upfront cost if purchased: £108,000 Useful life: 4 years Maintenance & insurance: £3,000/year Buying Outright: Year 1 cash outflow: £108,000 + £3,000 = £111,000 Depreciation expense: £27,000/year over 4 years Maintenance ongoing: £3,000/year Devices as a Service Solutions: Subscriptions payments: £30 per device per month = £43,200/year Includes maintenance, insurance and upgrades Key advantages of leasing include: Cash flow preservation – no major capital drain in year 1. Flexibility – Devices can be refreshed mid-contract, ensuring staff use current technology and maintain efficiency/productivity. Simplified accounting 16. It eliminates the distinction between operating and finance leases for lessees.1 This change is intended to enhance transparency by ensuring lease obligations are reflected in financial statements. However, as noted, important exemptions remain. Why most firms should not worry about computer leasing In most cases, laptops, tablets, and similar IT devices qualify for the “low-value asset” exemption under FRS 102 and IFRS 16.4 This means: Lease payments can continue to be expensed directly in the income statement. No need to capitalise the lease or recognise additional liabilities on the balance sheet. CFOs retain full flexibility to spread costs over time and maintain predictable budgets. The exemption applies on a leaseby-lease basis and is based on the asset’s value when new. While FRS 102 and IFRS 16 do not specify a precise monetary threshold, examples of low-value assets explicitly include laptop computers, desktop computers, tablets, and small items of office furniture. Several sources have put forward an indicative threshold of $5,000 (£4,000), which places most business devices firmly within the scope of the exemption. The IFRS 16 confusion: Why UK businesses have been worried The issue stems from media coverage of changes affecting leasing, which has created widespread confusion. Key sources of confusion include: 1. Media oversimplification – coverage often states that “all LEASING continued...
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