Accounting For Leases Assignment

Accounting
For
Leases

ABSTRACT
The Following report contains the detail information about the new accounting standard
AASB 16. Report also contains the information about the need for new accounting standards by
focusing in the drawbacks of the earlier accounting standards. It also states the various key
disclosure which the company has to mention in its notes to the position of its financial
statement.

Table of Contents
ABSTRACT.....................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Critical evaluation of the old accounting standard for lease (AASB 117) and their drawbacks
................................................................................................................................................1
Why was the changes necessary.............................................................................................2
What changes have been incorporated in the new accounting standard for lease AASB 16. 2
How will companies that have significant level of lease financing be affected by the change in
the accounting standard before...............................................................................................3
Why did companies have a tendency to classify most of the lease contract as operating lease
and relate to positive accounting theory regarding to behaviour managers...........................4
Implement of IFRS 16 than compare between companies to lease assets and companies to buy
assets.......................................................................................................................................5
Implementation of AASB 16 might have an effect on the leasing market.............................6
Key disclosure the company has made on its accounting for lease including on the transitional
provision and effect of the transition to AASB 16 from AASB 117......................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
A lease is a preparation under which a lessor agrees to allow a lessee to control the use of
known property, plant and equipment for a declared period of time in exchange for one or more
payments. The ownership of the underlying assets is shifted to the lessee by the end of the lease
term. It is depended on the selection of the lessee are that a lease can be designated as either a
finance lease or an operating lease. The presented report aims to provide a clear understanding of
Accounting standard of lease. To understand the concept of the report selected company
Woolworth group limited which is a major Australian company with extensive retail interest
throughout Australian and New Zealand. There are critically examine about the new accounting
standard which is developed for lease financing AASB 16. Apart from the report discuss about
the drawbacks of old accounting standards as well as positive accounting theory related to
behaviour of managers. It further defined about implementation of IFRS 16 to improve
comparability between companies lease assets and borrow assets.
MAIN BODY
Critical evaluation of the old accounting standard for lease (AASB 117) and their drawbacks
The Australian Accounting standards board made accounting standard AASB 117 leases
under section 334 of the corporations act 2001 on 15 July 2004 (Kieso, Weygandt and Warfield,
2016). The main objective of the standard is to prescribe, for lessees and lessors, the appropriate
accounting policies and disclose to apply in relation to leases. It is applied on prepare financial
reports according to part 2M.3 as per the corporation act. General purpose of the financial
statement to tackle of each other reporting regarding to entity. These financial statements are
held out to be and possible financial reporting analysis. The right of use asset will be non current
while the lease liability has been split between current and non current.
Drawbacks – There are mentioned drawbacks of old accounting standard foe lease which
is -
 The particular standard can not provide all appropriate information of lease in particular
balance sheet.
 AASB 117 has been carried forward to lesser model which can not work in effective
manner.
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