IFRS16 Accounting For Leases The Impact Of AASB Report 2022

Running head: ACCOUNTING FOR LEASES- THE IMPACT OF AASB (IFRS 16)
Accounting for leases- The impact of AASB (IFRS 16)
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ACCOUNTING FOR LEASES- THE IMPACT OF AASB (IFRS 16)
Executive summary:
The report is prepared to assess the impact of the new lease standard AASB/IFRS 16 on the
reporting entities listed on the Australian stock exchange. For the assessment of the impact of
such standard, two entities from the retail sector have been chosen named Harvey Norman
Holdings and Myer Holdings Group. It is ascertained from the analysis of the facts about the
adoption of the standard that the reporting entities would be identifying significant changes in
their accounting process. Nonetheless, such standard intends to serve the users of the
financial statements by making the information transparent by the disclosure of the lease
contracts and those as operating lease on the balance sheet.

ACCOUNTING FOR LEASES- THE IMPACT OF AASB (IFRS 16)
Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................3
Impact of the lease arrangements on the financial report by demonstrating financial and
operating lease:...........................................................................................................................3
Summarizing the lease values of company as stated in their financial reports:.........................4
Identifying the impact of the accounting rules for lease on two entities:..................................5
Determining the short term and long term impact of the changes to lease reporting:...............8
Conclusion:................................................................................................................................8
References list:.........................................................................................................................10

ACCOUNTING FOR LEASES- THE IMPACT OF AASB (IFRS 16)
Introduction:
The paper is developed to demonstrate an insight into lease accounting in relation to
two well-known retailers of Australia that is Myer Holdings Limited and Harvey Norman
Holdings limited. Major changes brought by the introduction of new lease standard has been
examined and how the accounting treatment for lease has changed after the implementation
of new lease standard AASB 16 is outlined in the report. It is believed that the former
accounting standard did not reflect the economic reality as many of the operating lease are
not recorded in the balance sheet. Due to this, off balance sheet liabilities considerably higher
than the liabilities reported on the balance sheet. Harvey Norman and Myer are Australian
based retailer with the former engaged in the retailing of bedding, furniture, electronic
products and latter operates the departmental stores. The existing accounting requirements
under the former lease standard that is AASB 117 has been replaced by the new lease
standard AASB 16 which is implemented and has been effective from July 1st, 2019 (Hladika
and Valenta 2018). These two entities under discussion have not adopted a single accounting
lease model that do not classify between the financial and operating lease.
Discussion:
Impact of the lease arrangements on the financial report by demonstrating financial
and operating lease:
The assessment of the impact of the new lease standard IFRS 16 on the financial
statement of the companies is identified in this section. Introduction of IFRS 16 has brought a
revolutionary changes in the world of lease accounting as the entities across all the industries
would be impacted by it. With the continuous evolvement in the landscape of retail,
unexpected vacancies is being faced by the commercial establishment and malls in areas of
high traffic. The concept of recognizing the asset as right to use is introduced under the new