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Report on Concept of AASB 16 Leases

   

Added on  2020-04-07

17 Pages2888 Words69 Views
Finance
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REPORT ON AASB 16
Report on Concept of AASB 16 Leases_1

AbstractLeasing constitutes an important activity for various organizations and is a strong way to get access to the assets in terms of procurement of finance. It is important for the user of the financial statements to have clear cut knowledge of the leasing activities of the organization. Thereport stress upon the concept of AASB 16 leases. This standard will be applicable from 2019. The old model was put to criticism for the deficiency on their part to cater to the need of the financial statement users. The report touches upon various matters of AASB 16 and for this Speedcast International Ltd based in GICS sector is selected.2
Report on Concept of AASB 16 Leases_2

ContentsIntroduction.................................................................................................................................................41.Change in leasing standard and its impacts.........................................................................................42.Effect of AASB 16 on Financial Statements..........................................................................................53.Reporting on the environmental and social aspects of the leased assets............................................64.Usefulness of AASB 16 to the users of financial statements of the lessee company...........................75.Summary of the total report to be presented to the Chief Executive Officer......................................9Conclusion.................................................................................................................................................10References.................................................................................................................................................11Appendix...................................................................................................................................................133
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Introduction AASB 16 shall be effective from 1st January 2019 onwards, the main objective of which is the recognition of all kinds of leases that are above 12 months in the financial statements. Under this standard, the lessee shall recognize the right to use an asset on the assets side and the liability to pay the lease payments on the liability side of the balance sheet. Further, the lessee shall also record the depreciation of such leased asset and the interest on lease liability in its income statement (AASB, 2016). Also, the cash flows shall show the cash repaid portion of lease payments and bifurcate it into interest and principal. This shall be common for all types of leases whether operating lease or finance lease. Hence, the application will cater to both types of leases.We shall elaborate the above points with regard to a company in GICS Sector – Speed Cast International Limited, a leader in the field of network service from the perspective of a stakeholder, say the Shareholders of the company.1.Change in leasing standard and its impactsi.Amendments in the lease standard The leasing standard has been changed due to the reason that the earlier model required to classify the lease into operating lease and finance lease but did not requirethe lessee to show the leased asset and its liability in its financial statements in case ofthe operating lease (AASB, 2016). Due to this the users and stakeholders of the financial statements of the lessee were not finding a satisfactory presentation of the lease transactions in the financial statements of the lessee in case of an operating lease. Hence the concerned boards have decided to make the requisite amendments to the leasing standards (Porter & Norton, 2014).ii.Disclosures in the income statement4
Report on Concept of AASB 16 Leases_4

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