Accounting and Financial Reporting

Added on - 21 Apr 2020

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IFRS 16Accounting and Financial ReportingRunning head: Accounting and financial reporting0
Accounting and Financial Reporting1Table of ContentsTable of Figure................................................................................................................................2Introduction......................................................................................................................................3Changes to Accounting Requirement..............................................................................................3Implications for Lessee................................................................................................................4Implication on Lessor...................................................................................................................5Effects on Financial Statements.......................................................................................................5Effects on Balance Sheet..............................................................................................................6Effects on Income Statement.......................................................................................................7Effects on Cash Flow Statement..................................................................................................8Effect on Singapore Airlines Limited..............................................................................................8Conclusion.....................................................................................................................................10References......................................................................................................................................11
Accounting and Financial Reporting2Table of FigureFigure 1Implications of IFRS 16.....................................................................................................5Figure 2 Effect on Balance Sheet....................................................................................................7Figure 3 Effect on Income Statement..............................................................................................8Figure 4 Financial Statements of Singapore Airline Ltd.................................................................9
Accounting and Financial Reporting3IntroductionA lease is a written agreement between owner of the property and a person or an entity who willuse the said property for a specified period of time on a specified payment. Leases can be ofshorter period and longer period as well where owner of the property is lessor and the person orbusiness who is using the property is the lessee. The lease contracts involves a series ofpayments so the question arise that how the lease and its related payments or installments will beaccounted by the lessee and lessor. FASB and IASB are about to issue a common reportingstandard of financial accounting which will replace the US accounting rules (Cotter, 2012).IFRS 16 introducing a single lessee accounting model and effective on or after 1 January 2019,for annual reporting periods and permission for earlier application of IFRS 15 has been granted.This lease standard is introduced with an objective to report the information which represents thelease transactions and supports by providing the basis to financial statement users in order togage the value and vagueness of cash flows that arise from a lease. IFRS 16 has few transitionprovisions in the existing finance leases and operating leases where the financial leases willremain to be treated as finance leases and operating leases has the option for a full or a limitedreflective restatement in relation to fulfill the requirements of IFRS 16 (Iasplus.com, 2017).In the following assignment the new requirements of lease standard for both lessee and lessor aswhat changes it brings to the existing requirements. The effects on financial statement and acompany who is listed in Singapore exchange and the company chosen for the same is SingaporeAirline Ltd. Which is a world’s largest passenger aircraft.Changes to Accounting RequirementThe introduction of IFRS 16 bring significant changes in lessee and lessor accounting butcomparatively the changes are more in lessee accounting which is of great importance. Howeverthe changes in accounting for intermediate lessor, those who sublease assets through headleaseand those particular headlease act currently as operating lease. This is done because the assetsand liabilities come to the balance sheet and the classification of the sublease will be determinedby taking the reference of intermediate lessor’s rights on the use of asset. And the implicationsfor lessees are need to be discussed thoroughly as the percentage of change in accountingrequirement are more to the lessee (Byard, and 2011).
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