CAPEX, capital expenditure, is recorded as an asset and expensed over its life, while OPEX is expensed as it is incurred, and under IFRS 16 an equipment lease of more than 12 months behaves much like the first unless the lessee elects an exemption. On a S$49,000 asset leased for 60 months at 8%, our build of the lessee's accounts charges 112.6% of a straight-line rental in year one and 86.4% in the final year, with the same total over the term. The IASB's Effects Analysis expects that shift to be "insignificant for many companies holding a portfolio" of leases, so the figures describe a single lease.
Singapore's SFRS(I) 16 and FRS 116 carry the same model, as does Malaysia's MFRS 16, which applies to entities other than private entities. ASC Singapore's SFRS for Small Entities (2024), open to small entities without public accountability, keeps the old split between operating and finance leases, and its para 20.15 expenses operating-lease payments "on a straight-line basis". We did not open Malaysia's framework for private entities.
A lessee carries most leases as an asset and a debt
"At the commencement date, a lessee shall recognise a right-of-use asset and a lease liability," reads para 22 of SFRS(I) 16. The liability is the present value of the payments still due, and the asset is depreciated, over the lease term where ownership does not pass (para 32). IFRS 16 has applied since 1 January 2019, replacing IAS 17 and its split between operating and finance leases.
The balance sheet changes more than the expense line. The IASB's project summary says the rent gives way to "a depreciation charge for lease assets (included within operating costs) and an interest expense on lease liabilities (included within finance costs)". In the 60-month example, depreciation is S$9,800 of year one's S$13,420. On 21 July 2026 the IASB found IFRS 16 "overall working as intended" in its post-implementation review; IFRS 18 changes how the income statement is subtotalled from 2027.
Lessees can expense short leases and single low-value items as rent
Both exits are elections. Under para 5 a lessee "may elect" to leave short-term and low-value leases outside the model and expense the payments straight-line or on another systematic basis. A short-term lease runs 12 months or less and carries no purchase option.
Low value is judged on the asset "when it is new, regardless of the age of the asset being leased" (para B3), and the examples in B8 "can include tablet and personal computers". In BC100 of the Basis for Conclusions, as published by ASC Singapore, the IASB says it had in mind assets worth "in the order of magnitude of US$5,000 or less" when new, a benchmark the standard does not state as a threshold. Two tax lines with similar figures test something else.
| Line | Set by | What it tests |
|---|---|---|
| US$5,000 | IASB, BC100 | Accounting benchmark for the low-value lease election, per asset when new |
| S$5,000 | IRAS | Cost per purchased asset for a one-year tax write-off, capped at S$30,000 per year of assessment |
| RM2,000 | LHDN | Value per asset for a small-value tax allowance, from year of assessment 2020 |
Accountants capitalise interlinked IT kit however cheap each part
An asset is low value only if it is not "highly dependent on, or highly interrelated with, other assets" (para B5(b)). In BC102 the IASB names "IT equipment made up of individually low-value component parts" as the case where adding up low-value leases is most likely to be material. Its Effects Analysis expects "office furniture, personal computers and mobile phones" typically to qualify. The short-term election turns on the lease term alone, so it remains open whatever the equipment is worth.
Year-one accounts record more lease expense than a flat rental would
We built the lessee's accounts on the payment schedule of our CAPEX to OPEX calculator, taking the lease liability as the price, no residual and straight-line depreciation. Its default plan, S$49,000 over 60 months at 8% in arrears, pays S$11,923 a year. By our arithmetic the lessee's charge runs as follows.
| Year | Depreciation plus interest (S$) | Share of the rental |
|---|---|---|
| 1 | 13,420 | 112.6% |
| 2 | 12,731 | 106.8% |
| 3 | 11,985 | 100.5% |
| 4 | 11,176 | 93.7% |
| 5 | 10,301 | 86.4% |
Both patterns total S$59,612.60. Over the 20 pairs of term and rate we tried, year one ranged from 101.5% of the rental (24 months at 3%) to 121.2% (60 months at 18%).
Before a correction dated 7 October 2026, the calculator discounted a payment made in advance as if it fell a month later. A reseller with a 30% margin on a S$49,000 cost, over 36 months at 8%, was shown an internal rate of return of 39.34% where the correct figure was 42.58%. A fact card also called early payments "mostly interest"; on the default plan the first was 32.9% interest. The correction fixes both and adds a lessee view like the table above, though the live page may show the old version until it is deployed.
Singapore's tax computation deducts the lease payments and adds back depreciation
The IRAS e-Tax Guide on FRS 116 and SFRS(I) 16 (fourth edition, 30 January 2026) allows a lessee deductions on "the contractual lease payments incurred, except under circumstances when a sale is regarded to have taken place", with the accounting interest and depreciation "added back" (para 6.3).
Its worked example has five annual payments of S$60,000 in arrears at 6%, a lease liability of S$252,742. By our recomputation the accounts charge 109.5% of the rent in year one and S$53,944 (89.9%) in year five. In IRAS's Scenario A, where the lease is not regarded as a sale, the deduction stays at S$60,000 a year. In Scenario B, a lease treated as a sale under section 10C, the lessee deducts the interest portion instead and claims capital allowances on the S$252,742. A purchase earns capital allowances too, and the IRAS capital allowances page lists computers for a 100% write-off in one year.
Malaysian firms claim a small-value allowance on assets of up to RM2,000 each
LHDN's Public Ruling No. 4/2026, published on 30 September 2026, sets the line at RM2,000 per asset from year of assessment 2020. Its summary table and para 8.2 leave the total unlimited for micro, small and medium companies and cap others at RM20,000 a year. Small-value assets bought on hire purchase are excluded (para 13) but can take normal capital allowances. We found no LHDN page on how a lessee under MFRS 16 is taxed.
Cloud subscribers book SaaS access as a service, and often its set-up too
In March 2019 the IFRS Interpretations Committee concluded that a contract giving "only the right to receive access to the supplier's application software over the contract term" does not contain a software lease; it "is a service contract". Its April 2021 decision found that the customer "often would not recognise an intangible asset because it does not control the software being configured or customised". Distinct configuration services are then expensed as the supplier performs them, and the rest over the access term, with any prepayment held as an asset. Additional code that the customer controls may still be an intangible asset.
