Accounting Theory and Current Issues

Accounting Theory and Current Issues

ABSTRACT
The purpose of the prevailing study is to evaluate and analyze the new accounting standard for
lease AASB 16 and to describe its need, objectives and impact. The study shows that the
previous standard for lease accounting (AASB 117) was not very effective, and had some
problems in terms of recognition of assets, representation of financial position, and so on.
Further, this has been solved by the AASB 16, by eliminating the classification of leases by the
lessee as either finance leases as well as operating leases.

Table of Contents
Abstract............................................................................................................................................2
Introduction......................................................................................................................................5
Main Body.......................................................................................................................................5
Critical evaluation of AASB 116 accounting lease standard, emphasizing on its drawbacks.....5
Requirement for change...............................................................................................................6
Types of changes incorporated in the AASB 16 new lease accounting standard........................7
Impact of change on companies having considerable lease financing level................................8
Classification of most lease contracts as operating lease by companies, and its relation of
manager’s behaviour....................................................................................................................9
Expectancy from 1FRS 16 to improvise comparability between companies who engaging in
leasing assets or borrowing to buy assets....................................................................................9
Explanation of the tendency reporting entities have in buying more assets and lesser lease
assets after the adoption of AASB 16........................................................................................10
Key disclosers made by Wesfarmers on its accounting for leases by considering the
transitional provision and effect to AASB 16 to AASB 117.....................................................11
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

List of Figures
Figure 1: Group operating lease commitments as lessee...............................................................11
Figure 2: Commitment and Contingencies....................................................................................11