logo

Financial Accounting of IFRS Assignment

   

Added on  2021-02-05

8 Pages1951 Words134 Views
HỌC VIỆN TÀI CHÍNHVIỆN ĐÀO TẠO QUỐC TẾInstitute of International Finance EducationDUAL DEGREE PROGRAMME- DDPESSAYTitle of the essay: IFRS 16: why it was issued and its impact on financialreporting in practiseCourse name: ADVANCED FINANCIAL ACCOUNTING & ADVANCED MANAGEMENT ACCOUTINGAcademic Year (Semester): 2019-2020 (Semester 1)Student Full Name: Pham Vu AnhIIFE ID: DDP0203003Class Code: Teacher: Word count: Hanoi, December 2020
Financial Accounting of IFRS Assignment_1
Financial AccountingLIST OF ACRONYMAcronymMeanings1SOFPStatement of Financial Positions2IFRSInternational Financial Reporting Standard3IASBInternational Accounting Standard Board4IASInternational Accounting Standard5SOPLStatement of Profit & Loss6EBITDAEarnings before Interest Taxes Depreciation/Amortisation7FASBFinancial Accounting Standards BoardI.INTRODUCTIONLeasing now a popular product in business financing is used in many countries allaround the world. According to Taylor (2011), leasing is the biggest foreign source offinancing, higher than loans from financial institution or commercial mortgages. This judgmentleads to demand for a standard array to report this account in SOFP. On 1 January 2016, anew accounting standard about lease IFRS 16 was published by IASB and in effect forcompanies that report under IFRS since 1 January 2019. It replaced the old leasing standardIAS17 and had a significant impact on reporting lease contract. This coursework will examinethe reasons for this replacement and discuss the impact on Financial Reporting in practice.Keywords: IFRS 16, lease accounting standard, IASB, impact financial reportingII.ANALYSISA.Why IFRS 16 was Issued?According to IASB chairmanHans Hoogervorst: “These new accounting requirements bring lease accounting into the 21st century, ending theguesswork involved when calculating a company’s often-substantial lease obligation. TheThe University of Greenwich2
Financial Accounting of IFRS Assignment_2
Financial Accountingnew standard will provide much-needed transparency on companies’ lease assets andliabilities, meaning that off balance sheet lease financing is no longer lurking in the shadows.It will also improve comparability between companies that lease and those that borrow tobuy.” To specify, under IAS 17, the lessee classifies the lease contract to operating lease orfinancial lease. If the lease was classified as an operating lease, only lease payments aretreated as an expense on SOPL and It does not have any impact on account in SOFP.Therefore, numerous non-cancellable operating leases were represented as an asset (orliability) but these accounts were disclosed in the note of SOFP mandatory. It is difficult for thefinancial statement’s intended user to pay attention to this information.B.The Impact on Financial Reporting in practice1. The forecast of impact before IFRS 16 in effectAfter 1 January 2016, there are many studies discuss about the result will be happened. According to the anylysis of IASB, the one has developed this new lease standard, shows thatIFRS 16 has a significant impact on the balance sheet and performance indicator in thecompanies classifying leases as an operating lease. 1.1Effect on balance sheet: ↑ Lease asset ↑ Financial liabilities↓ EquityIFRS 16 requires a company to report on the balance sheet lease assets and leaseliabilities for all leases (other than short-term leases and leases of low-value assets). The actual effect on a company’s reported equity will depend on the company’sfinancial leverage, the terms of its leases and the ratio of lease liabilities to equity. This in turndepends on the proportion of assets the company owns, the proportion of assets leased andhow the company finances its operations.1.2Effect on Income Statement↑↑ EBITDA↑ Operating profit & Finance cost ↔ Profit before taxThe University of Greenwich3
Financial Accounting of IFRS Assignment_3

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Financial Accounting Assignment Sample (pdf)
|7
|2366
|106

International Financial Reporting
|20
|3397
|2

IFRS 16 Leases: Implications for Lessor and Lessee
|10
|1947
|210

(solved) Advance Financial Accounting Report
|9
|2847
|90

IFRS 16 Leases and Standard IAS 17: A Comparison
|6
|1249
|121

BE130 Current Issues in Financial Reporting
|8
|2603
|453