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Why IASB chairperson believes that the former accounting standard for lease

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Added on  2020-05-16

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ADVANCE FINANCIAL ACCOUNTING 3 ADVANCE FINANCIAL ACCOUNTING Advance Financial Accounting University Name Student Name Authors’ Note Solution to Question i) 2 Solution to Question ii) 4 Solution to Question iii) 4 Answer to Question iv) 5 Answer to Question v) 5 References 7 Solution to Question i) Reasons why chairperson of IASB believes that the former accounting standard for leases did not replicate economic reality As mentioned in the given case the chairperson of IASB is of the view that the former accounting standard for

Why IASB chairperson believes that the former accounting standard for lease

   Added on 2020-05-16

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Running head: ADVANCE FINANCIAL ACCOUNTINGAdvance Financial AccountingUniversity NameStudent NameAuthors’ Note
Why IASB chairperson believes that the former accounting standard for lease_1
2ADVANCE FINANCIAL ACCOUNTINGTable of ContentsSolution to Question i)...............................................................................................................2Solution to Question ii)..............................................................................................................4Solution to Question iii).............................................................................................................4Answer to Question iv)..............................................................................................................5Answer to Question v)...............................................................................................................5References..................................................................................................................................7
Why IASB chairperson believes that the former accounting standard for lease_2
3ADVANCE FINANCIAL ACCOUNTINGSolution to Question i)Reasons why chairperson of IASB believes that the former accounting standard forleases did not replicate economic realityAs mentioned in the given case the chairperson of IASB is of the view that the formeraccounting standard for particularly leases did not necessarily reflect economic reality. Assuch under present accounting necessities, over and above 85% of the leases are referred to asoperating leases and are not registered on business concern’s balance sheet. Distinctly, theaccounting unit necessarily does not replicate economic reality. Regardless of operatingleases that is presented off the firm’s balance sheet, there remains no doubt regarding the factthat they generate authentic liabilities. Particularly, during the period of worldwide financialcrisis, there were certain leading retail chains that went insolvent as they were not capable toadjust rapidly to the novel economic reality (Choubey 2016). Also, the firms hadconsiderable operating lease commitments in the long-term on the firm’s stores, andnevertheless had deceivingly lean balance sheets. However, in actual fact liabilities presentedoff the balance sheet lease were more than 66 times higher than debt pronounced on firm’sbalance sheet. In addition to this, the present accounting for leases directs towards ainadequacy of comparability. As per the existing status, the corporations operating underIFRS essentially lease assets as well as commitments that amounts to nearly $3.3 million, andout of that nearly 85% are operating leases. Again, in a bid to compensate the same, thefinanciers mainly comprise of the projections that are not consistent, that are not inagreement, incomparable as well as inaccurate (Edeigba and Amenkhienan 2017). Thereafter,this is nearly cited that previous accounting standard failed to replicate economic reality.
Why IASB chairperson believes that the former accounting standard for lease_3

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