In the aviation industry, precision - whether in fuel calculations, flight schedules, or risk management - is as vital as operational excellence. As airlines, airport operators, and aviation service providers manage complex, diverse, and often high-value lease portfolios, the introduction of IFRS 16 has created new challenges, transforming lease accounting from a background task into a core strategic focus. This international standard redefined how leases are reported on financial statements, with both strategic and operational implications, making financial compliance too important to overlook. For aviation companies, where lease arrangements are wide-ranging and capital-intensive, complying with IFRS 16 is no longer just a regulatory requirement; it’s a business imperative. In this blog post, we explore the specific challenges IFRS 16 presents to the aviation sector, the risks of non-compliance, and why specialised lease accounting software like Nomos One is essential for maintaining accuracy, audit readiness, and strategic clarity in a complex regulatory environment.
Aviation lease structures
Aviation companies rarely deal with simple, one-size-fits-all leases. Instead, their lease portfolios typically span a diverse mix of asset types and contractual arrangements. Aircraft leases are only the beginning. These businesses also manage engine leases, hangar rentals, airport terminal concessions, ground leases, aeronautical rights, and even easements or rights-of-way, each governed by unique terms, durations, financial structures, and counterparties. What makes these lease structures particularly complex is the combination of high financial stakes and operational interdependencies. Leases may include performance-based clauses, revenue-sharing models, currency-indexed payments, and flexible extension or termination options. Some agreements are signed with government agencies or airport authorities, further adding layers of legal and regulatory considerations. Subleases and intercompany leasing arrangements, common in larger aviation groups, introduce additional reporting obligations and require careful inter-entity tracking. In this environment, accurately capturing lease details, calculating financial impacts, and managing critical dates and variations becomes increasingly challenging. A spreadsheet-based approach or disconnected systems are simply not robust enough to handle the volume, complexity, and reporting precision required under IFRS 16.
Impact of IFRS 16 on aviation lease accounting
The introduction of IFRS 16 has fundamentally changed the accounting treatment of leases. Under the previous IAS 17 standard, many aviation leases - particularly those considered operating leases - did not appear on the balance sheet. IFRS 16 eliminated this distinction for lessees by requiring that nearly all leases be recognised as right-of-use (ROU) assets with corresponding lease liabilities. This shift has major implications for aviation companies. At the inception of a lease, the business must recognise a ROU asset representing its right to use the leased asset over the lease term, and a lease liability representing its obligation to make lease payments. The ROU asset is subsequently depreciated, while the lease liability is unwound over time through interest expense. Furthermore, any change in lease terms, such as modifications to the lease period, payment structure, or scope, triggers a reassessment that requires recalculation of both the asset and liability. These recalculations must be precise, timely, and consistently applied. In a sector where leases are frequently renegotiated or restructured, keeping up with these ongoing adjustments presents a considerable administrative burden. IFRS 16 also imposes extensive disclosure requirements, demanding detailed breakdowns of lease-related assets, liabilities, expenses, and cash flows. Failure to meet these standards can compromise the clarity and accuracy of financial statements, making the organisation vulnerable to scrutiny from regulators, auditors, and stakeholders.
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The risk of non-compliance
Non-compliance with IFRS 16 presents significant financial, operational, and reputational risks, particularly for aviation companies whose financial reporting is closely watched by investors, regulators, and industry partners. Errors in lease accounting can lead to misstatements in financial reports, which may in turn affect valuations, debt covenants, or access to capital. For publicly listed or heavily regulated entities, the implications of inaccurate lease reporting can be severe. Beyond the financial ramifications, audit challenges also loom large. Aviation businesses that rely on manual processes, disparate data sources, or incomplete documentation often struggle to respond to audit queries with the level of accuracy and timeliness required. This can result in prolonged audits, qualified audit opinions, or additional internal costs to resolve discrepancies. Moreover, stakeholder trust can be quickly eroded if financial reporting lacks transparency or appears inconsistent. In an industry where collaboration with governments, international partners, and major infrastructure providers is routine, a strong reputation for compliance and financial stewardship is essential. Aviation companies cannot afford to appear unprepared, especially when IFRS 16 compliance is now the expected norm.
Simplifying IFRS 16 compliance for aviation businesses
Nomos One offers a dedicated lease management and accounting platform designed specifically to help aviation businesses navigate the demands of IFRS 16. Our solution is purpose-built to handle the scale, complexity, and nuance of aviation lease portfolios, providing both the structure and flexibility needed to remain compliant and efficient:
Automation
One of the core strengths of Nomos One is its ability to automate IFRS 16 calculations. The platform automatically generates right-of-use assets, lease liabilities, depreciation schedules, and interest expense figures based on your lease data. It also accounts for lease modifications and reassessments, ensuring that calculations remain accurate throughout the lifecycle of a lease.
Flexibility
Equally important is the platform’s configurability. Aviation businesses can manage aircraft leases, terminal agreements, land leases, subleases, and other contract types within a unified system. Custom fields, tags, and document attachments allow teams to capture operational and contractual nuances that matter to their business.
Actionable reminders
Timely alerts and reminders help ensure that key dates, such as renewal options or remeasurement points, are never missed.
Audit ready reporting
Nomos One’s reporting functionality is designed with audit readiness in mind. Detailed, exportable reports can be tailored to IFRS 16 disclosure requirements, providing clear documentation of lease assets and liabilities. The platform’s intuitive interface enables finance teams to manage leases efficiently, even when dealing with a high volume of complex agreements.
By consolidating lease data, automating accounting tasks, and supporting full compliance, Nomos One empowers aviation companies to meet their regulatory obligations with confidence, while freeing internal resources for more strategic work. Book a demo with Nomos One to see how our lease management and lease accounting platform can simplify IFRS 16 compliance, reduce risk, and bring clarity to even the most complex aviation lease portfolios.
