Chinese restaurant operator Xiabuxiabu says the impact of the new International Financial Reporting Standard 16 (IFRS 16), which changes the way leases are treated in financials, will seriously impact its profit this year. 

The Hong Kong-listed company issued a profit warning yesterday saying profit attributable to shareholders for the six months to June would decrease “significantly” compared with last year. 

“The application of IFRS 16 will result in a higher total charge to the statement of profit or loss in the first few years of the lease, and such expenses will decrease during the latter part of the lease term, therefore there is no impact on the expenses recognised during the lease term. As the group currently operates a large restaurant network with more than 1000 restaurants, the effects of the application of IFRS 16 will be significant,” said chairman H O Kuang-Chi.

“As the results for the six months … have not been finalised, the information contained in this announcement is only a preliminary assessment by the board based on information currently available including the unaudited consolidated management accounts.”

Xiabuxiabu will release its interim results by the end of this month.