Product Service System for Volvo Trucks: Finding new business value compliant with IFRS 16 leasing regulations.

Abstract: The International Accounting Standards Board (IASB) in January 2016 published International Financial Reporting Standards (IFRS 16), new guidelines on leasing standards with an effective date of January 1st, 2019. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). Under IFRS 16 the lease classification test i.e. classifying a lease as being on balance sheet or off balance sheet is done away with. This is as a result of the guideline’s expectations that all leases are treated as on balance sheet entries. The objective of this thesis is to develop a model to support Volvo Truck’s goal of offering IFRS 16 compliant off balance sheet leasing solutions. Utilizing a 3 step framework, this study identifies the off balance sheet threshold set in IFRS16 and matches it to a Product Service System classification. A Business Model Canvas is utilized to develop a business model that supports this off balance sheet contract. The thesis finds that by exercising the substantive right to substitute the truck during a lease deployment and by offering capacity based contracts, Volvo Trucks can provide a Product Service System centered, off balance sheet solution, to its leasing clients in compliance with the IFRS 16 regulations.