Accounting Standards and Regulations for Leases: AASB 117 and AASB 16

Accounting standards and regulations

EXECUTIVE SUMMARY
The present study shows that AASB 16 Leases introduces a single lessee accounting model in
which a lessee needs to realize all assets and liabilities means for each lessee with a time of
the period of over months, unless and until there is a low value of the underlying asset.
Further, a lessee must realize the right of using assets stating its right to making use of an
underlying leased asset with a lease liability stating its related obligations to make lease
payments. Proposed changes result in the better presentation of accounting information, but it
needs companies to make several changes as per proposed standard which attracts various
economic consequences. Study further shows that company had modified their accounting
for leases recognition by considering the provisions of AASB 117. Further, appropriate
disclosures has been provided regarding the changes in accounting provisions and estimates
by the company.

Part A
Summary of the current accounting policies related to the AASB117 leases of premises
As per the AASB 17, several of these lease activities have been classified as operating leases
and finance lease. Operating leases needs to be recorded at costs on a regular basis till the
contractual period of the lease expires in the income statement, and moreover, no effect has
been provided in the balance sheet (Morris, 2017).
This Standard aims to prescribe for lessees as well as for lessors, the suitable accounting
disclosures and protocols are to be applicable in relation to the leases. This standard is
applicable to the each business entity that is needed to maintain the financial reports as per
the Part 2M.3 of the Corporations Act i.e., the reporting business entity, and the common
purpose financial statement of every reporting business entity and financial statement that are
acquired to be common financial statements (Barone, Birt and Moya, 2014). The AASB 117
needs a lease to be categorized as operating or financial leases. Further, the amendments
made to the AASB 117 taking place from the AASB 2009-5 needs business entities to re-
consider the categorization of land components of all the current leases, and consider the new
land leases to identify if or if not they are in the operating or finance lease nature.
Part B
Summary of the Proposed accounting policies related to the AASB116leases of premises
The Australian Accounting Standards Board (AASB) expands issue and upholds the
Accounting Standards of Australia. Moreover, it includes interpretations.
AASB 16 Leases that is very efficient for an accounting of leases of premises which is
applicable on or after 1 January 2019 (i.e. 31 December 2019 or 30 June 2020 year ends).
Introduction of this standard will modify the accounting method and needs of the mainstream
of leases supposed by lessees and the manner to be mentioned on the balance sheet records
(Barone, Birt and Moya, 2014). Lessor accounting is considerably unaffected, and lessors
mostly carry on categorizing their leases as functioning or economics.
AASB 16 established a solo lease accounting technique and need a lessee to identify assets
and liabilities for all leases for the period of more than 12 months, except the fundamental
asset is of low value (Wong and Joshi, 2015). A lessee is obligatory to know a right-of-use
asset by expressing its right to utilize the original leased asset and a lease liability
demonstrating its compulsion to construct lease expenses.