AASB 16: Leases - Recognition, Measurement, Presentation and Disclosure

TABLE OF CONTENTS
INTRODUCTION........................................................2
OBJECTIVE.................................................................2
CLASSIFICATION........................................................2
Manufacturer or dealer lessors................................3
Subsequent measurement.......................................3

INTRODUCTION
Australian Accounting Standards Board (AASB) issued accounting standard
16 to make it easier for lessor and, lessee to do accounting for finance and
operating lease.AASB is a government agency under Australian Securities
and Investments Commission Act 2001.This standard also identifies the
entities to which it is applicable. Leasing is a very important aspect for many
corporate. It is a way of gaining access to ownership of assets without the
burden of finance and ownership over assets. The main objective to issue
this accounting standard is that the users of the financial statements are
aware of what leasing activities are going inside the entity.(Commonwealth
of Australia , 2016)
OBJECTIVE
The main objective of this standard is to recognize,measure,present and
disclosure of leases.All information should be provided in a proper manner
that can depict all those transactions which are true and fair in nature is the
main motive of this standard.This information is very useful to the users of
financial statement to analyze the impact of such lease on the financial
performace,cash position of the company.(Anon., 2016)
CLASSIFICATION
Two types of classification can be done by lessor as follows:
a) Finance Lease:A lease is characterized as finance lease if it transfers
all the risk and reward of ownership related to assets in which
ownership of assets prevail of lessor.
b) Operating Lease: A lease is characterized as operating lease if it
doesnot transfers all the risk and reward of ownership related to assets
in which ownership of assets prevail of lessor.